Price of export coal drops as shipping costs fall
May 4, 2005
By Simon Casey
The price of South African coal used to fuel power stations dropped after shipping costs fell to their lowest in more than two months.
Transport costs between Richards Bay, which has the world's largest coal export terminal, and Rotterdam dropped 7.2 percent last week to $18.62 (R114) a ton.
The route's costs have declined 4.8 percent this year. Eighty percent of South African thermal coal exports go to Europe. The global Coal RB index of coal delivered within three months from Richards Bay dropped 9c to $47.34 a ton last week.
The index is 5.8 percent lower than a year ago. Richards Bay moved 1.4 million tons last week compared with 1.92 million tons the week before, Oslo-based shipping agent Barwil Agencies AS said on April 29.
Deliveries were disrupted after a derailment on a line serving the port in March, said Australian consulting company Barlow Jonker.
"South African coal exporting ports have all performed well below their target rates," Barlow Jonker said in a report distributed by Barclays Capital last week. "Exports could decrease unless there is a major improvement shortly in coal railings."
The Richards Bay terminal is owned and used by Anglo American, BHP Billiton and Xstrata, the largest exporters of coal from South Africa.The terminal handled 65.9 million tons of coal in 2004, 14 percent of all seaborne global exports, according to data compiled by Morgan Stanley.
The global Coal NEWC index for coal from Newcastle, Australia, dropped 16c, or 0.3 percent, to $51.82 a ton. Recently, rising coal demand, led by China, has caused congestion at Newcastle and other Australian ports and boosted prices.
London-based Rio Tinto, which exports coal from Australia to China, is holding back mining expansion because of Newcastle's limited capacity. "We expect that the market will remain strong, with a positive outlook for price," Chris Renwick, the chairman of Brisbane-based Coal & Allied Industries, a coal producer controlled by Rio Tinto, said at a shareholders' meeting.
"The global coal market is the strongest it has been in a generation," Renwick said. Global Coal's indices are compiled from firm bids and from offers and trades made on its online platform.
Participants include BHP Billiton, Anglo American and Rio Tinto Group, the three largest mining companies; Electricite de France, E.ON and RWE, Europe's largest utilities; and Electric Power Development, Japan's largest coal buyer.
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