South African and Australian thermal coal prices moved up this week, due to growing supply concerns amid poor weather conditions in Australia and lingering rail issues in South Africa. Adding to the woes of global buyers are escalated freight rates.
Australian port and mining activities get disrupted by floods
The Newcastle port (key port for thermal coal export) has been closed for two weeks, starting 22nd March, due to heavy rains and floods. In addition to this, the main rail-line network of Hunter Valley that delivers coal to Newcastle port had also been shut due to heavy rains. However, limited operations have resumed between Newcastle port and Maitland after the flooding eased there.
Heavy rains had adverse impact on mining activities also, as Glencore is heard to be carrying out mining operations at reduced capacity in its New South Wales coal mines. Yancoal has also closed operations at its 19 mn t/year capacity mines in Hunter Valley region while only BHP’s mines continue to operate without any disruption.
This disruption caused by the heavy rainfall has pushed Australian high-grade 6000 NAR coal price by $10/t w-o-w to $105/t, FoB basis. Indian cement producers that have been actively procuring Australian coal in recent months once again turned their focus towards Indonesian and U.S. coal, with no bids being heard for Australian coal.
Persistent issues at Transnet pushes up S.African index
The API4 index for South African coal moved up to $95/t this week amid ongoing railing difficulties at Transnet Freight Rail (TFR). The rail operator has been working to improve rail supply to the export terminal, RBCT, following weeks of disruption.
In addition to an annual rail network shutdown in January for maintenance and challenges caused by heavy rains, locomotive availability has also been a key factor behind the ongoing disruption at Transnet.
Transnet is involved in a legacy dispute (including irregularities and cost overruns of billions of Rands) with some of its Chinese engine suppliers, which has impacted its locomotive supply and maintenance. The firm is also having problems sourcing drivers as overseas workers cannot easily enter South Africa amid COVID-19 restrictions, according to the market sources.
Subsequently, India buyers (contributing maximum share in S.Africa coal exports) also shied away from booking South African coal this week. The discounts for RB2 (5500 NAR) remained same as last week at $14-15/t for RB2 (5500 NAR) and at $25-26/t for RB3 (4800 NAR) grade coal.
The portside prices at Indian ports also got a push of INR 600/t w-o-w basis with trades being heard at INR 6,800/t ex-Gangavaram. However, by Friday, positive sentiments subsided and index stablised at $95/t while portside offers saw a correction of INR 100/t at Gangavaram port.
Indonesian index rises post 3-week correction
Indonesian thermal coal index has been correcting since the past three weeks as buyers from India and China were delaying their bookings amid higher freight.
However, as Australian and South African coal prices skyrocketed this week, inquiries for Indonesian coal from India increased. In addition to this, South Korean buyers were also heard to be showing interest in procuring Indonesian coal following recent closure of nuclear reactors in the country and higher Australian coal prices. This has led to the Indonesian coal prices to rise by an average of $2.5/t w-o-w basis.
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