Sellers of South African thermal coal met with fair demand from Indian buyers in the week to Friday due to higher prices for the main competing origin of Indonesia and issues with domestic supply.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
The high price of Indonesian coal meant South African coal was a cheaper option for South Asia-based customers and preferable freight advantages kept it in demand over other origins.
According to S&P Global Platts assessments, South African 5,500 kcal/kg NAR coal can be delivered to east coast India at parity with the current market price, while Indonesian coal was $2.80/mt above the delivered east coast India price.
Platts FOB Richards Bay 5,500 kcal/kg NAR price was most recently assessed at $75.95/mt, while the dry bulk freight rate for a Panamax vessel on the Richards Bay-east coast India route was assessed at $14.15/mt, giving a theoretical net forward price of $90.10/mt, flat with CFR India East 5,500 kcal/kg NAR price, while a Capesize shipment providing a theoretical net forward price of $84.25/mt, $5.85 cheaper.
Platts FOB Kalimantan 5,900 kcal/kg NAR -- broadly equivalent to 5,500 kcal/kg NAR -- price was $84.50/mt Friday, while the Panamax freight to East coast India was $8.40/mt, providing a net forward value of $92.90/mt, $2.80/mt above the CFR India East price.
Colombia was a cheaper option for coal than South Africa on a theoretical delivered-east coast India basis, but the longer, more expensive freight was less attractive to buyers who favored a short-term procurement strategy.
"Due to transit time Indian buyers are afraid the market will go down by the time the coal will reach them," a trader said.
PAKISTAN TENDER, CLOSING ARBITRAGE
South African was also the option of choice for a recent coal tender out of Pakistan for 50,000 mt, April delivery, 5,800 kcal/kg NAR minimum coal. The deal had not been finalized by Friday, and the buyer was assessing its options before making a decision.
The buyer told S&P Global Platts their equipment was best suited for South African coal, while the favorable freight cost and sailing times combined with the high pricing for Indonesian coal kept it the most attractive option for them.
The source added they were able to take coal from numerous origins, especially when the global pricing environment hit $90-$100/mt earlier in the year.
Sell-side sources were concerned the recent price fall across the Pacific region could close the arbitrage in the short term, given the slight increase week on week of prices in the Atlantic basin, with several sellers looking to close deals for South African coal to Indian buyers in the coming week.