South African coal price index moves up amid support from Australian mines closure
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South African thermal coal price index opened higher today, with prices up by $3.5-4/t against last week's closing prices.
Key highlights
---API index price for RB1 grade coal is at $61.3/t, while RB2 and RB3 are at $47-48/t and $38-39/t respectively, FoB RBCT port basis for October shipments.
---The discounts for RB2 grade are heard to be around $9-10/t and that for RB3 are at $12-13/t. Whereas, freight from RBCT port to India are assessed at $12.5-13/t for panamax vessel.
---The key reason as cited by the market participants for this price rise is Glencore's coal mines closure starting from 25 September for two weeks.
Glencore cutting down its thermal coal output
Swiss-miner, Glencore is set to close most of its Australian coal mines for 2-3 weeks in order to deal with COVID-led lower seaborne thermal coal demand.
---The company's New South Wales mines, Hunter Valley Operations and Collinsville mines will suspend operations starting 25 September.
---Glencore is expecting that the closures combined with reduced production in Indonesia, will help bring the seaborne thermal coal market back up.
Support to South African thermal coal prices
---Australian 5500 (kcal/kg) NAR grade thermal coal prices is assessed at $38-39/t against $35-36 in first week of September.
---South African thermal coal prices which were hovering at lower levels amid poor demand and increased competition from Australian coal.
---The curtailed supply from Australia is likely to boost demand for South African thermal coal.
---Australian thermal coal is used mainly by the cement sector in India and Pakistan, providing tough competition to South African coal in the last couple of months as Australian coal prices fell sharply.
Outlook:
---Coal buyers from the cement sector that had started procuring from Australia will likely shift back to South African coal and a sudden hike in prices might trigger demand from other sectors as well - fearing price increase to intensify further.
