July is proving to be a difficult month for South Africa in terms of coal supplies.
Following a 30-wagon train derailment earlier this month that resulted in delayed cargoes delivery, the civil unrest in the country that started last weekend has turned out to be another reason for fueling the rally in South African coal prices. The unrest is in response to the government’s recent arrest of former President Jacob Zuma.
While the RB1 (6,000 NAR) grade coal price has risen to $126/tonne (t) for Aug’21, up by 38% since Jan’21, RB2 (5,500 NAR) grade prices surged $94/t, up 30% since Jan’21.
In the ongoing scenario, a reduction in coal inventories at RBCT is being expected in the upcoming days.
Protest’s impact on coal supplies
The civil unrest that began at KwaZulu-Natal (KZN) province on Sunday has resulted in a major disruption for coal and other minerals export shipments as Force Majeure has been declared at Richards Bay Coal Terminal alongside other ports from 12 July until further notice.
Along with this, a few of Transnet’s rail lines connecting to RBCT’s port have also been sabotaged, resulting in their subsequent shutdowns. Roads are blocked and employees are unable to go to work safely.
KwaZula-Natal province, situated in eastern South Africa, harbours two major ports, Richard’s Bay and Durban, which are key export routes for coal, chrome, and manganese ore.
Transnet Freight Rail (TFR) has also postponed its scheduled annual rail maintenance work by a week and has flagged concerns over the protest and claimed it will have a “catastrophic impact” if the shutdown continued.
South Africa’s exports has dipped to 32 mn t in the first half of this year compared with 36 mn t in the year-earlier period, and the figure is also 7 mn t lower than the past six months of 2020. Now these mishaps would further hamper the country’s exports in the upcoming weeks.
In terms of domestic supplies, South African state power utility Eskom Holdings SOC Ltd has mentioned that its plants and coal supply has not been affected. It had suspended some operations as a precautionary measure on Sunday, but had resumed them on Tuesday.
What lies ahead?
July is going to be a crucial month both in terms of supplies and prices because if the civil unrest continues to intensify, coal shipments from the country will be under pressure, thereby lifting prices higher.
As South Africa is a major coal exporter to India, China, Pakistan and Vietnam, a supply crunch would further have a cascading effect in the domestic industries in these countries.
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