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South African Coal at 1 1/2 Month-Low; Buying Moves to Indonesia

The price of coal shipped from South Africa’s Richards Bay Coal Terminal, the continent’s largest export facility for the fuel, fell to the lowest in six weeks as buyers opted for Indonesian supplies.

Prices fell 2.4 percent last week to an average $120.90 a metric ton, data from Petersfield, England-based IHS McCloskey show. That’s the lowest since the week ended April 1. They’ve risen 36 percent in the past 12 months. South Africa has boosted exports to Asia as the Chinese and Indian economies expand, firing demand for power. That’s weakened recently, according to Amrita Sen, an analyst with Barclays Capital in London.

“The Indians and Chinese are not buying Richards Bay coal,” Sen said by phone today. “They prefer the lower-quality Indonesian supply and Richards Bay prices will trend lower over the next couple of weeks unless Indian buying emerges.”

India’s imports of South African coal fell 18 percent to 1.21 million tons in April compared with March, Kolkata-based trader mjunction Services Ltd. said on May 11. Shipments from Richards Bay terminal fell to 4.81 million tons last month from 5.36 million tons in the month earlier, according to a statement on the port website. India accounts for a quarter of the exports.

Indonesia is the world’s biggest exporter of coal burned to generate power. The country’s association of coal companies aims to export 340 million tons this year, AsiaPulse News reported on May 10, citing Chairman Bob Kamandanu. The government’s target is 236 million tons, it reported.

Indonesian Coal

Buyers are turning to Indonesian coal because it is cheaper than material sourced from Richards Bay, Barclay’s Sen said. The country cut the reference price for coal sales in May to the lowest since January, tracking a decline in the regional market, the energy ministry said on May 9.

“Investors, in our opinion, remain positive on the Indonesian coal sector,” Isnaputra Iskandar, a Jakarta-based analyst with Nomura Holdings Inc., said in a note today. They “agree with our view of the potential tight coal market situation over the next five years on a combination of strong demand in India and China and potential supply disruption in South Africa, Australia and Indonesia.”

Richards Bay Coal Terminal’s owners include Anglo American Plc, BHP Billiton Ltd., Xstratra Plc and Total SA. Shipments to the terminal, which can export 91 million tons of coal annually, have been constrained by freight-rail accidents.

Power-station coal prices at Australia’s Newcastle port, an Asian benchmark, declined 3.2 percent to $118.74 a ton in the week to May 13, according to the globalCOAL NEWC Index.

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