South African Coal to Compete with Rivals for its Market Share in India

South African coal is seemingly in danger of losing valuable market share from its major consumer India. Market participants have anticipated that there are several other origins that could dent South Africa’s share, owing to the unfavourable coal prices.

South African coal is of great value for Indian non-power sector, majorly preferred among the country’s sponge iron industries. However, the recent upsurge in coal prices is expected to affect coal buying from India.

Although, South African coal index API-4 has witnessed a hefty correction from its year high value of USD 109; but the constraint in supply growth is likely to support index above 100 USD mark. At present, the index was assessed at USD 102 as on 7 Aug’18.

South African coal prices have maintained stability this month, with price of 5500 NAR coal hovering around USD 85-86/MT, on FoB basis. No significant movement was seen in the coal price, while the discount offered on the grade also remaining the same at USD 9-9.5/MT.

Higher coal prices in South Africa have diverted Indian buyers’ attention towards Australian and Indonesian coal market, which offer cheaper alternate to the South African coal.

Australian 5500 NAR coal offered an advantage of USD 19-20/MT over the same grade South African coal, which was assessed at USD 66-67/MT on FoB basis.

Indian buying has seen its demand weakening after they had pre-stocked sufficient coal for the monsoon. However, the coal demand is likely to surge post monsoon as shortfall in domestic coal production and logistic issue in supply would push the country’s coal users, especially from the non-power sector to be dependent on coal imports.

If the South African are set to remain high, then Indian buyers are likely to seek alternative supplies for better pricing.

One such alternative to South Africa is US coal market, which has seen its export share to India rising in H1 CY18. On a positive note, recent data from US Energy Information Administration highlights that the country’s production has totaled 15.9 MMst in the week ended on 4 Aug’18, which was the peak weekly production for the year so far.