London, England — MININGREVIEW.COM — 25 June 2010 – A 30 percent rally in the price of coal delivered to Europe since the end of March is increasing the potential for South African mining companies to send more cargoes to the region, and fewer to customers in China and India.
Coal before shipment costs from South Africa’s Richards Bay traded at US$93.62 a metric tonne last week, while Northwest European coal was at US$95.88 “’ a premium of $2.26, according to IHS McCloskey. The premium will probably have to go even higher before shipments to Europe accelerate, Barclays Capital said.
“You would need to go around US$10, or above to get more sustainable flows of spot cargoes from South Africa to Europe,” said Amrita Sen, a London-based analyst at Barclays. “At those sorts of premiums it makes sense for South Africa to swing into Europe more,” she added.
European coal is rebounding from a slump of as much as 16% earlier this year amid a jump in prices for natural gas, which competes with the solid fuel to generate power. European industrial orders increased for a third month in April, the European Union’s statistics office said. Industrial production in Germany, Europe’s biggest economy, rose in April by more than economists had forecast in a Bloomberg survey.
South Africa cut coal shipments to the Atlantic region by 40% in the first five months of this year and boosted shipments to Asia by 63%, according to data from mJunction Services Limited, a web-based trader backed by India’s biggest steel producers.
“Sales to the Atlantic countries, led by Italy, Spain, Turkey and U.K., fell to 7.19 million tonnes in the first five months of 2010 from about 12 million in a year-earlier period,” said the Kolkata, India-based trader.
“Asian purchases rose to 16.6 million in the first five months of this year from 10.18 million tonnes a year earlier, said mJunction. Richards Bay shipped about 35% of its total coal to India this year until May.