Photographer: Dean Hutton /Bloomberg

South African Coal Finds Buyers Closer to Home as China Weakens

  • Coal supply shifting to new markets: South African government
  • African markets double share of exports from Richards Bay

South Africa’s coal exporters, which reported record shipments last year, are finding markets closer to home to replace waning Chinese demand.

“The market axis for coal is seemingly shifting towards new and emerging markets, marking a structural change from a well-established way of doing business," Mosa Mabuza, deputy director general for mineral policy and investment promotion at South Africa’s Department of Mineral Resources, said Thursday at an IHS conference in Cape Town.

Coal prices have dropped about 40 percent since the start of 2014 as weaker import demand from China boosted a global oversupply. That didn’t prevent exports from Richards Bay Coal Terminal climbing to a record 75.4 million metric tons last year, with the share of shipments to Africa doubling to 14 percent. 

Rapid population growth on the continent is increasing cement and power requirements, boosting coal demand, Darren Malone of IHS Energy, said in a presentation in Cape Town. Ethiopia and Kenya are set to double cement output by 2020, while Egypt plans to add 17 gigawatts of power generated by coal in 2027, he said.

"At the moment there’s a big rush to build cement plants in Africa," Malone said. “Africa will have to be rebuilt in a generation and this is going to take a lot of cement and energy."

Still, natural gas discoveries and the development of renewable energies pose a challenge for coal’s expansion in Africa over the long term, he said.

China Absent

Fuel shipped to Asia from Richards Bay, Africa’s biggest coal-export facility, dropped 7 percent last year. No vessels went to China, after the country accounted for about 3.5 percent of shipments in 2014. Richards Bay handles supplies from mines owned by companies including Glencore Plc, Anglo American Plc and South32 Ltd.

The International Energy Agency in December cut its five-year coal demand forecast for a third year and said the “golden age of coal in China” seemed over amid a slowdown in the world’s second-biggest economy. Coal use will rise by 0.8 percent a year through 2020, according to the Paris-based agency.

Increasing electricity generation in Pakistan will help compensate for softer Chinese demand as it becomes an annual importer of 15 million to 20 million tons of coal over the next five years compared with 4 million tons now, said Kamran Kamal, director coal trade and supply chain at Hub Power Co., which operates power plants in Pakistan. South African coal, which has lower freight costs than Australian and Colombian fuel and is a higher quality than Indonesian supplies, makes up about 75 percent of Pakistan’s imports, he said.

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