Euro Coal-S.African prices creep up again

Fri Jul 29, 2011

LONDON, July 29 (Reuters) - Prompt physical South African coal prices rose by around 50 cents a tonne on Friday, despite a fall of over $2 in oil prices on weak U.S. GDP data, buoyed by expected export disruptions due to the South African miners' strike and calls for greater Chinese coal imports.

Wage talks between the Chamber of Mines and unions representing workers at the major coal mines in South Africa failed, the National Union of Mineworkers said on Thursday.

Fresh talks began on Friday but both sides are far apart on terms.

If the strike continues beyond two weeks, miners will start to exhaust stockpiles at Richards Bay Coal Terminal and at the mines themselves.

This is not expected to have much market impact, however, as key end-users in Europe and India with South African supply contracts can easily absorb delays or cancellations.

"There's not exactly a shortage of coal, quite the opposite and it would be easy to find replacement cargoes," one utility source said.

The strike's impact so far has been more on sentiment and has encouraged some swaps buying which in turn has slightly bolstered physical values.

Oil dropped by over $2 after weak GDP data showed the U.S. economy stumbled in the first half of the year .

Any further pressure on the dollar will further bolster coal prices but raise coal exporters' cash costs, the cost of mining and moving coal to the point of shipment.

Activity in general has remained limited for the past week, due to the seasonal summer lull when coal use is at its lowest in Europe.

Asia had been expected to come to the market's rescue with a resumption of large-scale Indian and Chinese imports of benchmark origin coals such as South African.

This has not happened yet because key Indian buyers who account for more than 70 percent of the country's imports have bought cheaper Indonesian material rather than South African - they are waiting, they say, until prices drop to $110 or even $100 before returning to the market.

China has dipped in and out of the import market for the past six months and it is unclear whether power shortages will prompt more imports or not.

China faces tight power supply during the current scorching summer but shortages have turned out to be less severe than anticipated .

Nevertheless, China's National Development and Reform Commission has urged all relevant parties and regions to raise power supplies and curb unreasonable demand.

"Thermal power plants should proactively purchase thermal coal and increase coal imports," the NDRC said on its website.

To date, this has not translated into fresh buying but there are more enquiries from Chinese buyers being received by coal suppliers, for low to high-grade coal qualities.

TRADES

A September loading South African cargo traded at $118.00 FOB Richards Bay, up 50 cents.

An October DES ARA cargo traded at $125.50, unchanged.

PRICES

A September DES ARA cargo was bid at $124.50, down 75 cents on the bid.

An October DES ARA cargo was bid at $124.90 and offered at $126.00, unchanged.

An August loading South African cargo was bid at $115.00 and offered at $117.75, up $1.00 on the offer.
A September loading South African cargo was bid at $117.25 and offered at $117.75, up around 25 cents.

(sourced Thomson Reuters)