A lot of the big Instos were saying late last year that coal prices for 2010 were set to rise signifivantly. The following article certainly points to that prediction being correct.
S.Africa coal prices to spike on resumed India buying Thu Jan 7, 2010 2:01pm GMT Print | Single Page[-] Text [+]
1 of 1Full SizeBy Jackie Cowhig
LONDON (Reuters) - South African coal prices are set for another price surge to over $100 a tonne FOB as Indian and Chinese buyers compete for limited prompt supply, producers and traders said.
Indian buyers have been waiting since October for South African prices to fall back to $50.00 and many are yet to buy substantial tonnages which they have committed to end-users for Q1 delivery, traders and producers said.
Contrary to Indian traders' expectations, South African prices rose steadily during November and surged in December and again in early January to around $90.00 a tonne FOB Richards Bay.
"The Indians have totally missed the boat. We have nothing left for Q1 and not much for Q2 and we're not alone. We've done business into China already and have enquiries for 1 million tonnes from one Chinese utility alone," one major South African producer said.
"India needs at least 1-1.5 million tonnes a month from South Africa and if you assume cautiously that they only need to buy half of that during Q1, they will struggle to find it from anywhere in the market," he added.
India took over 30 percent of South Africa's 62 million tonnes of exports in 2009 and needs a similar tonnage in 2010.
"We've definitely noticed a rush in calls from desperate-sounding Indian trading companies looking for February and March coal," one broker said.
"Some of them are starting to realise that the market is genuinely tight and prices are not going to go down. They need to make some decisions very quickly if they want South African coal," he said.
TIGHT MARKET
"The market is very tight, it is true. The end-users in India are not willing to pay more than $100 a tonne CIF yet and the traders who have sold short are still hoping prices will fall," a major Indian coal trader said.
Indian traders have commitments to supply South African coal to cement companies including Ultratech and to utilities such as National Thermal Power Corporation.
"The market has gone up over $20.00 since those deals were signed. I wouldn't want to be any of those guys who sold short," the first producer said.
India has become such a vital market for South African coal that the withdrawal of Indian buying for a few weeks caused prices to fall on several occasions during 2009 but this year buying from elsewhere in Asia will make Indian withdrawals less of a price-moving factor.
"The Indians think that if they back off for a few weeks, then prices will fall. But they've been waiting more than two months for this to happen, and it hasn't," another South African producer said.
Chinese state utilities were in the market in December for several cape cargoes each of South African coal for Q1 and more for the balance of the year.
"If they don't hurry up, they will find the Chinese have booked whatever's available and they'll have to look at Indonesian or Russian or whatever," the broker said.
Some Indian traders are already making enquiries for Russian coal from Pacific ports into east coast India, as an alternative to South African.
But Russian exporters are seeking FOB prices of $10.00 a tonne higher than current South African numbers. Indonesian coal is a less palatable alternative because the quality is inconsistent, Indian traders said.
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