Indian demand lifts coal prices at Richards Bay
November 27, 2007
By Antony Sguazzin
Johannesburg - Richards Bay coal terminal expects a thirtyfold surge in sales to India this year, hiking prices for European power producers that are competing for supplies.
The facility shipped 7.3 million tons of coal to India in the first 10 months, compared with 300 000 tons for the whole of last year, Donovan Raj, the terminal's shipping co-ordinator, said last week. Another 2 million tons might go to India before the end of the year, he said.
The Richards Bay terminal is the biggest single source of coal for European power plants. Benchmark prices for thermal coal have hit records in Australia, South Africa and Europe in the past three weeks. Richards Bay coal prices have gained 86 percent this year.
Costs have risen because of shipping and rail bottlenecks as Asian customers compete for supplies with European utilities. London shipbroker Galbraith's said power producers were paying more for the shipping than for the coal.
Tata Power said last month that Indian coal demand would exceed supply for the next five years.
"India is the golden child at the moment," Raj said.
Indian power minister Sushil Kumar Shinde said in August that the nation planned to add 78 755 megawatts of electricity capacity in the five years to 2012. That would lift power output by 60 percent, much of it through coal-fired plants.
Gerard McCloskey, the chairman of UK-based consultancy McCloskey Group, said: "India in the medium term is going to be a massive importer." Its imports would rise to 100 million tons a year by 2015, from 33 million tons now, he said.
Kuseni Dlamini, the terminal's chief executive, said Richards Bay's shipping potential would expand to 91 million tons a year by the first half of 2009, from 72 million tons now.
"That is a market the world is looking at," Dlamini said. The terminal, which has about 3.5 million tons of coal stockpiled, is owned by mining companies including BHP Billiton and Anglo American.
Coal exports from Richards Bay rose to $95.10 (R648) a ton last week, the highest price since at least August 2000, according to McCloskey Group. Coal from Australia's Newcastle port rose to a record $88.63.
The jump in prices is encouraging European utilities to buy coal from the US. Peabody Energy, Consol Energy and Arch Coal, the three biggest US coal firms, have forecast the largest increase in exports in 20 years.
Demand is also coming from Japan and South Korea, which each bought 300 000 tons of coal through Richards Bay this year, compared with none last year.
McCloskey said Asian interest "is helping to sustain prices. It is guaranteeing good returns for anyone involved in the South African coal industry."
BHP Billiton's Ingwe unit is the biggest exporter of coal from South Africa, followed by Anglo Coal and Xstrata.
More than a quarter of western Europe's thermal coal is shipped from Richards Bay. Exports to October were 53.8 million tons, little changed from last year.
Raj said volumes this month should total 5.6 million tons, from 6.48 million tons last year.
Derailments of trains run by Transnet Freight Rail and bad weather had hampered shipments, Dlamini said.
Turnover times for ships at the port have been slowed by equipment shortages at the National Ports Authority.
While Richards Bay is the biggest coal export terminal, Australia's Newcastle port ships more of the fuel from two terminals.
South Africa is the biggest thermal coal exporter after Australia and Indonesia.
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