Despite elevated thermal coal prices post the onset of the Russia-Ukraine war, South Africa managed to keep its export shipments firm in April at 5.3 mnt amid surging demand from few Asian and European countries, CoalMint vessel line-up data reveals.
In fact, exports from South Africa would have risen this month, if only it was not capped by the logistic constraints at RBCT Port.
How trade dynamics changed?
Thermal coal trade balancing
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With sanctions on Russia by majority countries and the subsequent rise in LNG prices, Japan and South Korea procured more South African coal to meet their demand for the power sector on the onset of the summer season.
Shipments to Japan were recorded a 275% m-o-m rise in April, while that to South Korea were, up by 146% m-o-m.
Shipments to China also witnessed a whopping 368% rise m-o-m to 0.33 mnt in April as there was no payment system for the trade between the two countries when the bookings were made. Moreover, buyers were also skeptical of booking Russian cargoes amid logistics issues.
With the sanctions on Russia nearing to kick-start by mid-August, Japan, South Korea, and the EU have been stepping up their coal import volumes from alternative sources like Indonesia, South Africa, and Australia.
Buying from India, Pakistan falls
Shipments to India have been on a weaker side from South Africa for the second consecutive month as it fell down 12% m-o-m, as per CoalMint data.
The fall came amid unviability of running operation by Indian sponge iron manufacturers due to high raw material prices. South African coal prices surged upto $400/t in early March as major countries imposed sanctions on Russia following it’s invasion on Ukraine.
The sponge iron players that are key users of South African coal in India preferred using the blend of imported and domestic coal and a few even cut down on their capacity utilisations amid unaffordability.
Shipments to Pakistan also fell to 21% last month as cement buyers looked at cheaper Afghanistan coal as an alternative to South African stock.
European market scenario
In 2021, Russia accounted for nearly 40% of imported European gas, and 17% of its coal and coke imports.
Thus, shipments to several European countries rose considerably amid the absence of Russian coal as exports to Spain were up 136% m-o-m, and Belgium were up 245% m-o-m in April.
Only in case of the Netherlands, shipments to the country witnessed a 50% m-o-m decline in April.
Elevated LNG prices in the wake of western countries’ sanctions on Russia had compelled the Netherlands to buy more coal in March.
However, in April, LNG prices retreated and Netherlands reduced its coal buying, resulting in drop in its imports.
Short-term outlook
Amid strong coal demand across the globe, South African exports are likely to remain firm and may even rise with domestic coal supply tightness in countries like India. Only in case of China, shipments may see a drop as with the Rouble-Yuan system in place. China is heard to be booking more of Russian coal at heavy discounts. Logistic constraints, however, are seen capping any any major rise in South African exports.
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