South Africa’s thermal coal exports dropped 25% m-o-m to 4.91 million tonnes (mnt) in January 2024 as against 6.57 mnt in December 2023. However, exports dropped 2% y-o-y as compared to 5.02 mnt in January 2023.
Factors behind the decline in export volumes
- Collision of Transnet trains disrupts South Africa’s coal export line
South Africa witnessed a significant downturn in coal exports following a collision between two Transnet trains near Richards Bay. The incident led to a week-long halt, exacerbating Transnet’s ongoing struggles in coal transportation. Persistent challenges, including derailments, equipment shortages, vandalism, and adverse weather conditions, have collectively contributed to a substantial decrease in coal exports.
Furthermore, on 18 January 2024, Bulk Connections, the Durban coal terminal company, declared force majeure due to adverse weather and flooding.
- Drop in Indian buying due to rise in domestic production, tepid demand
Local demand in India was still met by the domestic supply. State-run miner Coal India Ltd (CIL) continued its robust performance in terms of coal production in January 2024. CIL’s production rose by 9.1% y-o-y to 78.4 mnt in January 2024 as against 71.9 mnt in January 2023. Limited buyer engagement for South African coal persists, driven by anticipated price declines amid subdued demand. The market reflected reduced industrial activity, resulting in lower consumption and constrained trading, ultimately contributing to the drop in South African coal exports.
Exports to major Asian countries
India was the largest buyer of South African coal at 1.92 mnt in January 2024, down 39% m-o-m as against 3.17 mnt in December 2023. Buying activity for South African coal remained limited, driven by expectations of further price drops amid subdued demand.
Furthermore, there was a significant difference between domestic and South African thermal coal prices. Consequently, end-users are opting for domestic coal for its cost-effectiveness. During the month, South African coal purchases were made only based on essential requirements.
Shipments to South Korea rose by 42% m-o-m to 0.57 mnt in January 2024 as against 0.40 mnt in December 2023. Exports to Japan dropped by 32% m-o-m to 0.30 mnt in January 2024. Exports to Taiwan stood at 0.30 mnt as against nil in the previous month.
Moreover, shipments to China rose by more than twofold to 0.15 mnt as against 0.06 mnt in December 2023. Exports were supported by Chinese pre-Lunar restocking. post-holidays growth is expected to be constrained by substantial Chinese mill purchases and existing inventories, indicating a potential stabilization in South African exports to China even after the conclusion of the Lunar New Year festivities.
Exports to Europe
Among European countries, The Netherlands stood as the largest importer at 0.24 mnt in January 2024, dropped by around 50% m-o-m as against 0.48 mnt in December 2023.
Shipments to Germany stood at 0.08 mnt, remained stable m-o-m, while Exports to Spain dropped by 87% m-o-m to 0.03 mnt.
Outlook
Exports are anticipated to drop as market participants continue to stay on the sidelines, primarily due to the wide bid-offer disparity and weak demand from sponge iron producers. Furthermore, robust domestic supply in India continues to fulfill local demand, posing potential pressure on South African coal exports. The rise in domestic production adds to the factors influencing the downward trend in anticipated export volumes.
