South African physical coal cargoes maintained a premium over Australian and European prices as rolling power black-outs due to a severe shortage in electricity generation threatened coal mining and ship loading capacity.
South Africa’s national utility Eskom – struggling with a serious liquidity crunch, frequent strikes, a credit downgrading to junk status as well as top-management changes – has implemented frequent blackouts this year as it cannot produce enough electricity to meet demand.
The blackouts threaten mining and coal loading activity at South Africa’s massive Richards Bay export terminal.
Shipping data in Reuters shows that there are currently 14 large dry-bulk ships waiting to load at Richards Bay, some of which have been in queues for up to a week.
Prompt cargoes from South Africa’s Richards Bay terminal last closed at $63.75 a tonne, compared with $60.65 for Australian cargoes from its Newcastle terminal .
South African prices have also been kept at a premium to other suppliers as its main buyer, India, has recently stocked up on imports in anticipation of an El Nino weather event this year, which would likely reduce rainfall and hydro-power capacity and force utilities to use coal-fired power as a replacement.
Australian coal miners, who sell mostly to China, have been hit hard as the government in Beijing tries to reduce its coal use in order to combat pollution and supports local miners to replace overseas suppliers.
As a result, China’s thermal coal imports are expected to drop by 52 million tonnes or around a quarter in 2015, a Reuters poll showed.
Cargoes for delivery into Europe’s terminals at Amsterdam, Rotterdam and Antwerp (ARA) which, unlike South African and Australian shipments, include the price of freight, were much cheaper with a last settlement of $57.55 a tonne as demand in Europe sags with the beginning of the warm summer months.