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Colombian thermal coal heads to Middle East in rare move

Singapore — In a rare move, a Capesize vessel laden with Colombian thermal coal has made its way to the Persian Gulf, according to S&P Global Platts cFlow trade-flow software and trade sources this week.

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The MV Pioneer, a 171,681 dwt Capesize ship, reached the outside port limits of Mina Saqr in the United Arab Emirates on May 25, after it sailed from the Colombian port of Puerto Bolivar on April 17.

Shipowner-cum-operator Oldendorff's transloader is currently unloading the cargo and that will be completed in about a week, according to market sources.

Coal trading sources pointed out that this was a rare fixture, however, there can be similar shipments, depending on FOB Colombia versus FOB South Africa coal prices as well as freight rates.

Article Continues below...



"There was an arbitrage opportunity as the freight [rates were low}, and also the South African coal prices were higher [at that time]," said a coal trader. Market sources said it would be difficult to see sustained imports of Colombian coal into the Asia Pacific and Middle East region, given the freight advantage of other origins.

"Currently, the global coal market is strongly oversupplied, mainly due to the slowdown in Chinese demand and imports into developed countries. So it's very simple to find very cheap coal on the market. Honestly, I think Middle East countries could find more easily better deals from Indonesia, South Africa or rather from the Russian Federation," said Luigi Bruzzone, an analyst at Banchero Costa.

"Columbia has to rely on the [Asia Pacific] as a market in five years from now as demand from Europe is set to drop even further," said Mercuria Energy Trading's Director for Dry Bulk and Energy Fabio Gabrieli at the recently concluded Coaltrans Asia conference in Bali.

Most of the coal imports into Mina Saqr are mainly used in cement and steel production.

The cement industry in the UAE has taken advantage of an increase in the number of building permits issued, which was an average of 19% per annum from 2009 to 2014.

Crude steel output had increased by an average of 48% per annum from 2006 to 2015. The first four months of 2016 had registered a 10% increase year on year, according to data from Banchero Costa.

--Shriram Sivaramakrishnan, shriram.krishnan@spglobal.com
--Edited by Geetha Narayanasamy, geetha.narayanasamy@spglobal.com