Grasim coal prices to set new record -traders

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LONDON, Oct 8 (Reuters) Indian cement maker Grasim's tender for Q4 coal is expected to draw the highest prices yet for delivered coal into India, Indian traders said.

Grasim is seeking two panamax cargoes of South African coal for late October and November shipment.

''This tender is likely to set a new benchmark for Indian coal prices,'' one major Indian trader said.

He added: ''1, 2 and maybe 5 a tonne CIF have been paid but no higher than that. I think Grasim will have to pay at least 0.00 a tonne.'' Two December loading South African coal pananax cargoes traded on Monday morning at .00 a tonne FOB Richards Bay.

Current panamax freight rates are around .00 and are expected to rise further.

A few Indian consumers of imported coal have continued to tender regularly despite steadily rising coal and freight prices this year.

''They are not all so price-driven. Grasim buys for its regular needs, not when prices are attractive. The demand is still strong and it is still there,'' the trader said.

Other consumers in the cement and sponge iron sectors which can take a variety of imported coal and can blend it with domestic, have recently scaled back their buying.

''The consumers have been living on a hand-to-mouth basis for the past few months now and they can carry on doing that for at least another few months while they wait for lower prices,'' another Indian trader said.

''Gujarat Ambuja tendered recently for three South African cargoes but they took only one, at a price much lower than anybody else offered,'' he said.

''Most of the buyers are doing the same - taking only what they must and waiting,'' he added.

India is expected to import 9-10 million tonnes of South African coal in 2007, up from around 3 million in 2006.

Despite the insistence of Indian traders and consumers through the year that the Indian market is entirely price-driven and that no Indian buyer would pay over .00 a tonne FOB or .00 CIF, South African imports have been at record levels even through the monsoon months of July and August.

REUTERS MP HS1811

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