RBCT responds as Transnet ups pace

[miningmx.com] — COAL shipments from Richards Bay Coal Terminal (RBCT) are expected to exceed 6 million tonnes (Mt) for the second month running in November amid another outstanding performance from Transnet Freight Rail (TFR).

TFR is thought to have delivered 1.5Mt of coal weekly from Mpumalanga province, although Andre Boje, CEO of Wescoal Holdings, believed TFR could test deliveries of 7Mt for the month.

The downside is that with shipments of 6Mt, South African exporters will have been inevitably exporting at sizeably reduced dollar prices. The international price of seaborne coal has been under pressure lately with prices hovering around $101/t or even lower, some 9% down since September.

However, South African executives and analysts think the subdued coal price is just a temporary climb down.

“I think it’s a lull,” said Don Turvey, CEO of Australian-listed Continental Coal who added that the wet season in Queensland would put upward pressure on the coal price as supply was disturbed.

Commenting on TFR’s delivery improvements, Turvey said: “TFR is breaking records by the minute, especially in the number of trains that are being delivered. This is not a short-term phenomena. This thing has legs.”

Calls to RBCT on coal stockpiles went unanswered, but it last month reported shipments some 49% higher at 7.38Mt. Stockpiles stood at 4.28Mt end October, but a shipping source told Miningmx stocks were currently lower at 3.75Mt, suggesting RBCT had responded well to the improved deliveries from TFR.

COAL OUTLOOK

Stockbrokerage UBS said in a recent note that thermal coal prices had slipped 7% to 9% since September, despite the fact that pre-northern winter restocking normally commenced about now. A lack of credit and adequate inventories in Europe and China were perhaps the reasons for this, it said.

It added the price weakness was “fleeting”, however. Demand risk when rains hit coal supplier Australia would serve as a buffer for further weakness while the price of gas, which is a substitute fuel for coal, was increasing.

“Given that thermal coal’s price movements are buffered, that we’re at the start of pre-winter restocking, and that the coal-burning economies of China and India will remain heavily dependent on imports for marginal tonnes, we see any related price weakness for thermal coal as a further buying opportunity,” UBS said.

This view was echoed by Barclays Capital. In a note dated November 23, the bank’s research unit said the thermal coal was still relatively high on a long-term basis and that China demand would provide it with fresh impetus. The short-fall in Chinese power demand was 40GigaWatts for this winter and spring against expectations of a shortfall of 26GW, it said.

What happens in China, and Asia at large, is increasingly important for South African coal. Asian demand for South African coal has been increasing steadily since it first appeared on the radar of South African exporters in 2007.

“TFR is breaking records by the minute, especially in the number of trains that are being delivered.”

Today, an estimated 15% of all exports from RBCT head for China, while nearly 30% of total South African exports are absorbed by India. Atlantic seaborne trade has fallen to a fifth of total since 2005.

Of some assistance to South Africans was the recent weakness in the rand, last trading at R8.3 to the dollar. “From a budget perspective, we’re slightly up,” said Turvey of the effect of the weaker rand.

However, Keaton Energy MD, Paul Miller, said inflation remained a problem. “The cost pressures remain. We’re not being fully compensated by the rand,” he said.

According to Bevan Jones, GM of the Johannsburg office of commodities trader, London Commodity Brokers (LCB), the rand price of South African export coal is about R900/t – pretty much the level of January 2011 – but is expected to test R1,000/t in the first quarter of 2012.

Thermal coal was “unloved and unburnt”, he said in a note to LCB clients published on Monday.