THE unexpected surge in international thermal coal prices to levels as high as $80/t which took place during November on exports from Richards Bay is unlikely to last and a more sustainable price range would be between $60/t and $70/t.
That’s according to Exxaro Resources group manager: marketing and logistics, Sakkie Swanepoel, who commented today that price levels above $70/t were likely to attract more coal supply into the market.
Speaking on a teleconference following publication of Exxaro financial director Riaan Koppeschaar’s pre-close statement on the group’s expected performance for the year to end-December, Swanepoel said prices above $70/t were likely to stimulate extra supply from Indonesia in particular.
Exxaro minerals MD, Nombasa Tsengwa, added that the wild card in the situation was what the Chinese might do following the diplomatic spat between China and Australia which was affecting Australian coal exports to China.
“What are the Chinese going to do? Are they going to take coal from familiar players or are they – in the long-term – going to take it from Colombia? There’s a lot of uncertainty there,” she commented.
Swanepoel said the Chinese restrictions on Australian coal imports had resulted in the Australians “running much more aggressively into our markets” while there had also been more competition in the Indian and Middle-East markets from Colombian and Russian suppliers as well.
Asked about the prospects for greater South African exports to China to take advantage of the cutbacks in Australian supply Swanepoel replied that, apart from the economics involved, there was a quality issue given the strict Chinese limitations on trace elements in coal, specifically fluorine.
“Typically South African coal does not fall within the limitations that China has imposed on five critical trace elements in the coal it will import.
“Most South African coal producers are currently going through a process to analyse samples from different mines to determine if their coal will be acceptable to the Chinese market.
“I am only aware of two vessels from South Africa that have sold to China so there’s a lot of noise in the media and the market and plenty of talk, but not so much coal actually going there.
“We do get quite a lot of requests from China about the availability of coal so we are looking into it, but I would expect Colombian and Russian coal along with Indonesian might find it easier to get in there.”