Indian sponge-iron mills have recently started heating Mozambican thermal coal as an alternative, at a time when coal is at least 8% to 10% cheaper than popular South African offers.
According to the portal Clubofmozambique.com, “the price of the Mozambican offer is about $207 per tonne – lower than its current market price (of $220 to $240 per tonne) and also cheaper than the South African variant, currently priced between $225 and $250 per tonne.”
About 1 000 000 tons of VT-1 grade coal from Mozambique and Vulcan Energy’s mines are expected to arrive in India in the first week of August. The South African variant, popular with sponge iron mills, is the RB2 variant, which has a NAR of 5500 kcal/kg. Australian coal does not find much use due to the Indian millers’ furnace specification.
“The offer price made by the trading company that is bringing in the Mozambican coal is about $207 per ton, which is quite a bit cheaper than the RB2 variants. So some factories have started to show some interest,” a sponge iron mill owner told BusinessLine, quoted by Clubofmozambique.
South African coal prices have seen some volatility. The RB2 variant has been high, with prices up 12% since July 1, when it was at $200 per ton and now at around $225 per ton. Demand from European nations has been high as they seek to increase quantity to meet the needs of the energy sector.
In the recent past, one of India’s largest steel producers has experimented with VT1 grade coal brought in from its captive mines in Mozambique. The results showed that the average consumption is 700-800 kg/ton of sponge iron, with about 800 kg of coal required to produce 1000 kgs of sponge.