HomeEnergy MineralsAsia is now SA's top coal client

Asia is now SA’s top coal client

Coal “’ Asia is
SA’s new number
one customer
Kolkata, India — MININGREVIEW.COM — 19 August 2010 – South Africa’s Richards Bay Coal Terminal “’ the continent’s biggest export harbour for the fuel “’ is selling more coal to Asia than to Europe for the first time, as economic growth in China stokes demand.

Producers increased shipments to Asia by 45% in the first seven months of the year and cut those to Europe by 41%, according to mjunction Services Limited “’ a Kolkata-based trader backed by Tata Steel Limited and Steel Authority of India Limited, two of the country’s three biggest coking-coal consumers.

“Europe didn’t really need the coal this year because of high stocks and low burn at British and European power stations,” Julie Sharp, head of coal trading at Germany-based RWE AG, the nation’s second-largest utility, said in an e-mail. “It took a little while for Asian buyers to respond.”

Asian appetite is soaring just as European demand falls amid a clampdown on greenhouse gases and concern government spending cuts and tax increases will hamper the recovery. U.K. imports dropped 43 percent from January to May, according to government data. Shipments to Rotterdam, Europe’s largest coal harbor, declined 0.6 percent in the first half from a year earlier, Port of Rotterdam Authority said on its website.

Coal prices at Newcastle in Australia, the benchmark for Asia, averaged US$96.94 a metric tonne this year through July, according to IHS McCloskey, a Petersfield, U.K.-based data provider. The Richards Bay average is US$87.85, according to McCloskey. The gap between the two grades has widened 58% to US$9.09 in 2010 from US$5.77 last year.

Asian purchases from Richards Bay were about 24 million tonnes through the end of last month, five times more than Europe’s, mjunction said. Imports in July totalled 4.52 million tonnes, almost as much as the 4.84 million sent to Europe in the first seven months.

Demand in Asia is unlikely to diminish as the region’s economic growth outpaces the rest of the world, according to Brent Spalding, an analyst with Wood Mackenzie Research Consultancy in Brisbane, Australia. China’s economy, which surpassed Japan’s as the world’s second-largest in the quarter ending June 30, will expand 10.5% this year and 9.6% in 2011, the International Monetary Fund said July 7. India will increase 9.4% in 2010 and 8.4 percent next year, according to the IMF.

“In the medium to long term, European demand will recover to historic levels and increase further as domestic production of coal decreases, increasing their demand for South African coal,” said Mxolisi Mgojo, executive general manager of coal at Pretoria-based Exxaro Resources Limited. “Asian demand will however continue to grow, and South African coal will continue to flow into this market.”