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http://www.bdlive.co.za/business/mining/2013/04/25/coal-prices-set-to-rise

Coal prices set to rise
BY DAVID JACKSON, APRIL 25 2013, 19:01

MINING production in coal is expected to stabilise over the next two quarters as mining companies attempt to regain the losses incurred during the recent labour disputes.

And according to international credit insurer Coface, local coal demand will also be impacted by increases in the coal price as a result of increased exposure to higher-cost, short-term contracts.

Coface risk analyst George Marais says that while the surplus conditions in the market pose downside short-term risks, the firm believes that once supply cutbacks take effect and demand begins to improve the market should become more balanced, supporting the coal price.

Thus prices are forecasted to trend higher over the medium term.

South Africa is the fifth-largest coal producing country in the world, producing — on average — about 224-million tons of marketable coal a year. About 77% of the country’s primary energy needs are provided by coal.

South Africa is also the world’s third-largest coal exporting country, exporting 25% of its production internationally. South Africa uses 53% of the balance of its coal production for electricity generation, 33% for petrochemical industries (Sasol), 12% for metallurgical industries (ArcelorMittal) and 2% for domestic heating and cooking.

The industry is highly concentrated, with a handful of companies producing about 80% of the salable coal production. More than 58,000 workers are employed in the coal mining industry.

South Africa’s global position in terms of hard coal production has slipped, notes Mr Marais. It now ranks sixth behind China, the US, India, Australia and Indonesia.