The rising cases of COVID-19 globally has forced various countries to announce complete lockdown to contain its spread with India and South Africa no exception to it.
Both the countries, India and South Africa have announced complete lockdown for next 21 days starting from 25 March and 26 March 2020. Our CoalMint team had a word with various industry participants and here are the key points.
South Africa coal mining scenario amid lockdown
With this announcement, the mining operations in South Africa, a key source of thermal coal will also shut for three weeks as the country goes into lockdown to stem the infection rate of Covid-19.
Now according to the market sources, while the fossil fuel’s supply to Eskom (South Africa’s key power utility company) will continue uninterrupted by its suppliers as it has been classified as an essential commodity for electricity generation, other coal mines have to undergo care and maintenance work during the lockdown period where none of the employees (except for care and maintenance employees) will be allowed to go underground or into pits.
Apart from this, South African state transport operator Transnet has confirmed that all the country’s bulk terminals will be closed to minerals shipments under a three-week government-ordered lockdown. The bulk terminals will close to “mineral mining commodities” from 10pm on March 26 until 6am on April 17, with the exception of essential services.
Thus, the national lockdown is expected to have a considerable negative impact on the country’s coal mining operations and its exports.
Can India continue import via ports?
With India also announcing lockdown for 21 days and ports declaring ‘Force Majeure’ a key concern is will thermal coal supplies from South Africa to its key export destination, India continue.
On an average RBCT port exports around 5-6 MnT of thermal coal in total with about 60% being exported to India. Now our reliable sources have informed us that although commercial coal mining operations will stop in South Africa, the Richards Bay port has coal stock of around 3.7 MnT at present.
With ports at South Africa being open for the export of essential commodity, RBCT can still export the coal stock at port with coal being categorised as essential commodity. However, the clarity on which product is deemed essential and whether loading already started would be allowed to be completed is still awaited.
In case of India although there is force majeure in place at Indian ports such as Gangavaram and Krishnapatnam (where majority of coal is being imported), sources have informed us that vessels can come if customers are ready to take the delivery and also if there is no congestion at the port.
But on demand side, with majority of sponge iron units – key consumer of South African thermal coal being closed amid lockdown, there is hardly any trade taking place. However, few traders are now interested to stock-up South African coal with mining being closed and uncertainty looming ahead, resulting in surge in API index prices.
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