Asia Tops Europe First Time on South Africa Coal Imports: Energy Markets
Asia Tops Europe in South African Coal Imports
Naashon Zalk/Bloomberg
A ship docks at Richards Bay Coal Terminal while it is loaded with coal set for export.
A ship docks at Richards Bay Coal Terminal while it is loaded with coal set for export. Photographer: Naashon Zalk/Bloomberg
South Africa’s Richards Bay Coal Terminal, the continent’s biggest export harbor for the fuel, is selling more to Asia than to Europe for the first time as economic growth in China stokes demand.
Producers increased shipments to Asia by 45 percent in the first seven months of the year and cut those to Europe by 41 percent, according to mjunction Services Ltd., a Kolkata-based trader backed by Tata Steel Ltd. and Steel Authority of India Ltd., 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 U.K. and European power stations,” Julie Sharp, head of coal trading at Essen, 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 $96.94 a metric ton this year through July, according to IHS McCloskey, a Petersfield, U.K.-based data provider. The Richards Bay average is $87.85, according to McCloskey. The gap between the two grades has widened 58 percent to $9.09 in 2010 from $5.77 last year.
Coal Demand
Asian purchases from Richards Bay were about 24 million tons through the end of last month, five times more than Europe’s, mjunction said. Imports in July totaled 4.52 million tons, 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 percent this year and 9.6 percent in 2011, the International Monetary Fund said July 7. India will increase 9.4 percent in 2010 and 8.4 percent next year, according to the IMF.
Railroad Capacity
“The trend of South African coal moving to India and Asia will continue,” Spalding said in an e-mail on Aug. 13. “They can get more from India for coal and demand is more.”
Shipments to Asia were less than 10 million tons a year between 2001 and 2007, while Europe’s exceeded 40 million, Richards Bay Chief Executive Raymond Chirwa said in a Jan. 27 presentation to investors in Cape Town. In 2009, exports to Europe dropped to 28.1 million tons, representing 46 percent of total sales, from 38.9 million a year earlier. For Asia, shipments more than doubled to 25.1 million tons in 2009 from 11.1 million in 2008, he said.
Exports from Richards Bay may be “limited” for the next two years because of inadequate railroad capacity to transport the coal, DnB NOR ASA said in a report on Aug. 12. Shipments from Richards Bay may rise to 79 million by 2015 from 65 million forecast this year, Norway’s largest bank said.
Port congestion in Australia is driving up the price of exports, according to shipbroker Clarksons Plc.
Zama Luthuli, a Richards Bay spokeswoman, declined to comment in an Aug. 10 e-mail, citing confidentiality rules.
China overtook the U.S. as the world’s biggest energy user last year, underscoring how developing nations are driving global growth, Fatih Birol, the chief economist at the International Energy Agency, said July 19. China burned 1.54 billion tons of coal last year, three times more than the 498 million tons consumed by the U.S., BP Plc said in its Statistical Review of World Energy.
Chinese Consumption
Imports by China and India will grow at least through next year, based on IMF projections.
“More South African coal is going to Asia as a result of lower short-term European demand,” Mxolisi Mgojo, executive general manager of coal at Pretoria-based Exxaro Resources Ltd., South Africa’s fourth-largest producer of the fuel, said in an Aug. 17 e-mail.
Coal consumption in China may increase 8 percent in 2010, according to Martin Wang, an analyst at Guotai Junan Securities Ltd. in Hong Kong. Demand jumped 14 percent in the first half after increasing 20 percent in 2009, according to data compiled by Bloomberg.
China became a net coal importer for the first time in 2009 after foreign purchases more than tripled to a record of 125.8 million tons from a year earlier.
Thermal Coal
Consumption in India, Asia’s third-largest energy user, may double from 2008 to 2015 to exceed 1 billion tons a year, Wood Mackenzie said in a report in July. Imports doubled last year to about 60 million tons from a year earlier, Macquarie Group Ltd. said in March.
Thermal coal imports by India may climb to 72 million tons in 2011, according to Tata Power Co., which is building a coal- fired plant at Mundra in western India with a capacity of 4,000 megawatts.
“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 Exxaro’s Mgojo. “Asian demand will however continue to grow and South African coal will continue to flow into this market.”
To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net
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