COVID-induced demand and supply disruption worldwide led to a price plunge and compelled coal miners globally to explore new destinations to sell their produce.
One such coal exporting country is Colombia. The world’s fifth-largest coal exporter which majorly caters to the coal requirements of Latin America, Europe and Mediterranean, started diverting (since April) some of its production to India.
India imported about 2.19 mn t of thermal coal from Colombia during Apr-Jul’20, which stood at nil in the past years, as revealed by India’s vessel line-up data maintained with CoalMint.
In terms of prices, Colombian thermal coal (5000 NAR kcal/kg) export price dropped to as low as $42/t in May’20 which has now recovered to $48/t, FoB Peurto Bolivar basis. However, this is still lower by 38% since the prices at the start of last year.
Colombian coal miners respond by aggressively lowering production
In response to the price plunge and tepid demand, Colombian coal producers have decided to curtail their output.
While the country’s biggest miner, Drummond is undertaking restricted production, the other major miner – Prodeco, is on care and maintenance and is looking for suspension of operations for 4 years. Whereas, the other major miner – Cerrejon expects its coal output for 2020 to be at 6.5-7 mn t against 8.6 mn t in 2019. Colombian coal unit of US-based Murray Energy, CNR has also suspended its operations recently and is expected to remain non-operational until Dec’20. Meanwhile, there is another factor affecting smooth production of coal in the country, as the workers there have voted for a strike.
S.African coal demand to get a boost from India?
CoalMint learned that no non-coking coal vessel is coming to India from Colombia in August and market participants also revealed that currently there is very limited availability of Colombian cargoes in the spot market.
Colombian coal is mainly used by power plants given higher heating value and high VM (Volatile Matter). Its key importers in India are traders and power plants based in coastal areas.
This absence of thermal coal supplies from Colombia would likely be mitigated by South Africa, as on an average about 30% of South African coal imports are directed towards power sector and during Jan-Jul’20, India’s thermal coal imports from S. Africa dropped by 18% y-o-y basis.
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