No evidence of supply disruptions either, say Indian importers

At a time when miners worldwide are complaining of a slowdown in demand, thermal or steam coal prices have shot up nearly 18 per cent in last month in South Africa.

South Africa is India’s second largest source of imports, after Indonesia. In 2011 India imported approximately 65 million tonnes of coal from Indonesia and 17 mt from South Africa, for electricity generation.

Between November 1 and November 30, the price of 6,000 kilo-calories (net, as received) of South African coal increased by nearly 17 per cent, from $77 a tonne to $90. Prices further inched up by $1 to $91 a tonne in the first two days of December.

Indonesia prices

What makes the development interesting is that South African coal prices are rising without any significant demand growth from India and China.

That the overall market mood is subdued is also verified by the relatively stable price of Indonesian coal. The price of 4,200 kcal (gross as received) common Indonesian variety inched up from $37.9 a tonne to $38.5 during the same period.

Reports suggest there is hardly any evidence of major supply disruption in South Africa, except that the government authorities are considering a proposal to levy taxes on coal exports to ensure cheaper supplies to domestic industry.

No supply crunch

Indian importers also do not mention any decline in availability. “There is hardly any evidence of a supply crunch as distress cargoes (cargoes declined by the contracted buyer) are abandoned,” a Kolkata-based importer told Business Line.

According to India Coal Market Watch (ICMW), there is hardly any evidence of supply constraint or demand growth pushing up South African coal prices. “We are expecting prices to start softening from end of this month” a publication spokesperson said.

(This article was published on December 7, 2012)
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