South Africa physical coal hits 2.5-year low on oversupply
Physical prices for South African coal have fallen to multi-year lows, while diverging quite markedly from the related API 4 paper market, amid oversupply and weak demand.
The Global Coal Richards Bay (South Africa) index was assessed last at USD 69.40/t – its lowest level since September 2016.
“There’s very little support in the prompt for South African coal,” said a coal broker, noting this was due to a combination of abundant supply and a lack of buyers.
Coal stocks at Richards Bay – South Africa’s largest coal export hub – were pegged last at around 3.75m tonnes, sources close to the port said.
Yet the API 4 Q2 contract – which reflects the physical Richard’s Bay prices – was significantly higher, at USD 75.20/t, on Ice Futures.
And on Tuesday, while an April-loading physical cargo traded at just USD 65.50/t, the equivalent API 4 contract was at around a USD 9/t premium.
“I’d say the April [physical deal] was more representative of the current market,” the broker said.
“For now, prompt demand is slack and supply is adequate, hence the price moves down,” said a coal analyst with a European energy firm, adding that such a spread between front-month paper and physical prices was unusual.
“In general [they move] in tandem, as paper needs to converge with the spot price at the delivery time,” she said.
Another Europepan coal analyst said the high premium on the paper market was not reflective of the market conditions, pointing instead to seller efforts to support the export price.
A further physical deal on Tuesday, at USD 73/t for a May cargo, was “inflated”, he noted.
A Pretoria-based coal analyst also said the April physical cargo price was a more accurate reflection of the market than the May trade.
“Prices are still going down,” he said.
At the time of writing, no Richards Bay cargoes had changed hands in the current session.
South Africa’s thermal coal exports fell to a 19-month low of 157,000t/day in January amid a sharp drop in demand from India, according to latest customs data.