South African coal prices have gone up quickly of late, driven by ongoing concerns regarding the usage of pet coke in India.
Coal price index API-4 had reached USD 96 last week, but after the Supreme Court eased the ban on pet coke for Cement and Lime industry, index price has slightly come down and is assessed at USD 95.25 .
Although the recent South African coal offers have not changed from the previous week, there exist various factors that are likely to support coal prices in the coming month.
1. Supply Tightness: Coal supply at the Richards Bay coal terminal (RBCT) was disrupted in Nov’17 due to loading issues. South African coal miners which were unable to supply their shipments in Nov’17 are now looking to clear their previous month’s backlog in Dec’17.
An Indian trader mentioned that he had heard some Indian inquiries for South African coal shipments were turned down due to low cargo availability, and anticipated the present condition to remain until Jan’18.
2. Global Coal Shortage: Thermal coal market around the globe is facing supply shortage. With China buying aggressively for winter stocking, bad weather affecting Indonesian coal production and the rising Australian coal prices, South African prices are affected as well.
3. South African miners hold stock to gain more: Many Japanese and South Korean power utilities float coal tenders in this part of the year. In a bid to gain profits through these tenders, African coal miners release lesser coal in open market, so as to get higher price realisation.
4. Indian Buying Spree: Indian imports have been increasing because of the domestic coal shortage, and it seems that the trend is likely to continue. Although, the Court has relaxed the ban on pet coke usage, the government has substantially increased import duty on the fuel to 10% which was 2.5% earlier.
Domestic pet coke producers in line with the government’s call, have also raised offers by INR 500/MT. The pet coke offers if not compatible, will lead to another surge in South African coal prices, as the buyers may eventually turn towards South African coal to meet their demands.
Market participants have informed that the discounts on coal prices have also been lowered by South African miners. 5500 NAR coal was offered at a discount of USD 7.5-8/MT on API-4 index, while 4800 NAR coal was offered at a discount of USD 13-14/MT.
South African 5500 NAR coal is assessed at USD 79-80/MT, FOB Richards Bay and 4800 NAR coal price at around USD 65-66/MT, FoB Richards Bay. The coal prices are likely to remain firm till Jan’18.
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