South African thermal coal export shipments to India have been on a declining trajectory since the beginning of this year as elevated global coal prices compelled the Indian sponge iron industry to look for alternative-origin coal.
Shipments to India recorded a 35% m-o-m fall to 960,000 t in July, as per CoalMint vessel line-up data. Exports from the country began declining in February following the Russia-Ukraine war. However, it increased in May as the domestic coal supply crunch left the sponge sector completely reliant on imports.
Elevated global prices and the slower pace of domestic coal deliveries to the sponge iron industry have resulted in a change in the buying pattern of the sector as it diversified its import sources from Mozambique, low CSN Australian coal, and even Russian coal.
Russian coal usage in DRI production is set to grow in the coming months given cost-competitive prices and several units that have been using it on a trial basis for blending purpose, said experts at CoalMint’s India Coal Outlook Conference 2022 held earlier this month.
South African coal exports fall 8%
South African thermal coal exports fell by 8% m-o-m to 4.9 mnt in July with lower shipments to the Netherlands.
Exports to the European country fell by 34% m-o-m to 400,000 t due to port congestion leading to delay in unloading of cargoes.
The 10 August deadline for the Russian embargo had resulted in a rise in imports of coal and other energy fuels from alternate sources.
Shipments to major Asian countries
Exports to major Asian countries, however, recorded strong growth last month with higher power consumption demand.
Shipments to South Korea rose by 26% amid higher-than-expected summer temperatures this year. The country has activated emergency measures to pull its power reserves below 5.5 GW.
Exports to Pakistan rose by 16% as elevated Afghan coal prices and transport issues compelled traders to switch back to traditional markets.
South African coal shipments to Japan rose sharply by 97% due to limited supply from Australia amid heavy rains.
Shipments to China also rose remarkably by 84% as power utilities focused on rebuilding stockpile. However, with rising domestic coal output in China and cheaper Russian coal availability, enquiries from South Africa and other origins have eased considerably.
Short-term outlook
South African coal exports to India are likely to be under pressure amid elevated high-CV coal prices. However, demand for low-CV (4800 NAR) remains strong following the rising blending ratios with alternate-origin coal.
European demand, on the other hand, remains strong as the Russian embargo comes into force with plans of higher coal usage in power generation in Germany, Austria and the Netherlands.
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