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SA coal price recovery to continue as Asia demand reminds world of fuel’s importance

The international thermal coal market is staging a major recovery pushing prices to around $130/t free on board (fob) out of Richards Bay as coal-fired power generation continues to expand in Asia.

That’s according to coal industry consultant Xavier Prevost of XMP Consulting who said other contributing factors to the price boom included declining coal production in China and a surge in prices in Europe caused by flooding and logistical issues.

Citing statistics from IHS Markit, Prevost said forecasts were that export coal prices would average $127.85/t in the third quarter of this year; $126/t in the fourth quarter, and $114/t in the first quarter of 2022.

This surge in prices and demand is taking place during a period when South African coal exports through the Richards Bay Coal Terminal (RBCT) are running well below levels achieved last year. The lower exports are a result of Transnet’s problems railing the coal to the terminal where the route is blighted by logistical, criminal, and security issues.

According to Prevost, buyers in Pakistan – which on average sources some 90% of its imported thermal coal requirements from South Africa – were looking for Indonesian and Australian coal because of the problems in South Africa.

Addressing the 2021 Coal Industry Day seminar in Johannesburg, Prevost said this year’s coal demand surge of around 4.5% would reverse last year’s decline in coal demand and push it to above the levels achieved in 2019.

“The power sector accounted for just over 40% of the drop in coal use in 2020, but the rapid increase in coal-fired generation in Asia sees it account for three-quarters of the rebound in 2021,” said Prevost.

“While an exceptionally cold snap in December in north-east Asia is partly to blame for increasing coal demand, the rapid growth of coal-fired electricity generation is a reminder of coal’s central role in fuelling some of the world’s largest economies.”

He pointed out that China’s raw coal production during June was 5% down from a year earlier but the country’s power demand rose 9.8% over the same period.
Source: Miningmx

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