South African coal price index API-4 has touched new highs by crossing the 100 USD mark as coal supply tightness in the country intensifies. The coal index is used as a reference for setting South African coal prices.
Coal index API-4 assessed at USD 100.65 as on 8 May’18, has witnessed a steep increase from the previous month when the index remained almost constant at USD 94.
Market participants have highlighted that the continual supply tightness and strong activity in paper market, has pushed the coal index higher.
At the beginning of the CY18, South African coal miners were offering lesser coal in export market to negotiate high price in South Korean coal tenders. The mismatch in coal production-supply schedule further escalated when bad weather had affected the coal movement from the mines to Richards Bay port (RBCT). Moreover, there had been congestion at the port due to the prevailing high winds.
An Indian trader informed that the rising coal prices have resulted as a consequence of the continual supply tightness, which has been carried forward from the previous months. Adding that, the coal miners were busy in clearing off the previous month’s backlog shipments, and hence had less shipments to offer for the current month.
South Africa’s major power producer Eskom is also said to have negotiation going on for its 100 MnT coal tender, which it requires for the next five years. The mega-tender is also seen as a threat to the coal availability in the export market.
South African 5500 NAR coal was offered at a discount of USD 5-6/MT, while 4800 NAR coal was offered at discount of USD 12-13/MT. Accordingly, 5500 NAR coal was priced at USD 87-88/MT, FoB Richards Bay, while 4800 NAR coal was priced USD 70-71/MT, FoB Richards Bay.
Rise in South African coal prices to open door for Australian coal?
Market Participants had underlined that there was growing possibility for Australian 5500 NAR coal to emerge as an alternative to South African 5500 NAR coal.
Australian 5500 NAR coal available at USD 75/MT on FoB Basis, could attract Indian buyers taking advantage of a USD 12-13/MT differential between the two coal prices.
An India trader had commented that Australian thermal coal is not increasingly popular among Indian buyers because of its high ash content. However, with near term supply tightness of South African coal, buyers could make a move towards Australian market to meet their pre-monsoon demand.
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