South African thermal coal exports rose marginally by 2% m-o-m to 5.3 mnt in Jun’22 as increased demand from Europe offset lower exports to the Asian market, CoalMint vessel line-up data revealed.
Shipments to India, however, recorded a steep decline of 30% m-o-m to 1.5 million tonnes (mnt) last month.
Why exports to India decline?
This sharp fall in exports to India came as demand from its top consuming sector, sponge iron, had turned sluggish after the Indian government announced its decision to impose a hike in export duty on steel in the last week of May.
While this decision has come with an intention to curb inflationary pressure in the domestic market, the same has made Indian steel less competitive in the export market.
Domestic sponge iron prices in India, since then, eased by INR 3,000/t, but recovered and are currently assessed at INR 33,300/t exw-Raipur.
Shipments to Europe surge
*Qty in mnt
With the deadline for Russian sanctions slated to come into effect from 10 August, European countries have increased their usage of thermal coal and South Africa is now a major importing destination for this geography.
Shipments from South Africa to Europe have seen a significant increase, as volumes to The Netherlands are up 23%, and to France by a whopping 180%.
Shipments to the Asian markets mixed
*Qty in mnt
South African coal exports to most Asian markets have remained under pressure due to their elevated prices.
Last month, shipments to South Korea fell sharply by 28%, while there were no exports to China. The strong demand for Russian coal in the Chinese market has led to the decline in imports from other origins.
Exports to Pakistan recorded a slight rise of 5%. Chances of a major increase was limited as its local industry focused on importing coal from its neighboring country, Afghanistan.
Shipments to Taiwan, however, rose by 12% due to the country’s rising demand for coal following Russian sanctions.
Short-term outlook
Low-CV (4800 NAR) South African coal demand has emerged strong in the Indian market owing to its competitive pricing over mid-to-high CV grades (5500 NAR) that may result in increased vessel arrival in the country in July.
European demand, on the other hand, remains strong as several countries within the Continent, including Germany, Austria, and The Netherlands, have announced plans to increase their coal usage for power generation. This may lead to increase in South African total coal exports in the near-term.
To know more about South African coal demand in India and its overall coal export trajecotry for the second half of the year join us at India Coal Outlook Conference. CoalMint will be hosting the India Coal Outlook Conference on 3-4 August 2022 at The Lalit, New Delhi, to discuss the key issues pertaining to domestic coal production and supply, the government’s objective of controlling imports and domestic supply gap affecting many industries, the need to increase the purchasing power of Indian steel companies in the volatile global coking coal market as well as issues related to decarbonization of the coal value chain.
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