JOHANNESBURG (miningweekly.com) – The oversupply of coal and resultant “flailing prices” have cranked up the pressure in the global coal industry, with warnings of an “investment drought” in commodity projects.

“Continuing flailing prices could be devastating for commodity exporters. World economies could face an investment drought in commodity projects,” South32 Africa region president and COO Mike Fraser told delegates at the IHS Energy South African Coal Exports Conference, in Cape Town, on Thursday.

China’s move from an investment-driven to a consumption-led economy had severely affected coal exporters, with the country’s current seaborne coal imports down 32% year-on-year.

India picked up some of the losses, with strong imports in the first half of 2015. This was driven by coal-fired plants stocking up. India’s imports have remained marginally up this year, by 1.8%, said Fraser, who added that South32 had been able to capture the growth in India, as well as other emerging markets over the past two years.

Indian steel producer JSW Steel senior VP Arun Maheshwari, said South Africa supplied about 20% of India’s coal imports; a level he expected would be maintained.

Indian conglomerate Reliance Industries head of petroleum coke and coal Mike Nelson cautioned, however, that India was a price-sensitive market and could look to Indonesia for more coal if South African prices were to rise. 

He said South African coal was a good option and that the country was a consistent player in the global coal industry; however, Australia, Columbia and Russia were offering competitive rates.

Meanwhile, coal imports into Africa have risen 5% this year, while import growth in Turkey was up 12% year-on-year.

IHS Energy analyst Darren Malone said demand in Egypt was quickly improving, with Senegal also showing good demand. He also envisaged demand growth opportunities in the Middle East, but this would be dependent on the Hassyan power project, in the United Arab Emirates.

Malone said he also anticipated additional demand for South African thermal coal from cement producers in East Africa.

In South Africa, Fraser said coal faced headwinds from low energy prices. But there were still excellent opportunities in South Africa, in line with the country’s goal of achieving 95% electrification to households. Coal is expected to remain the largest contributor to the energy mix.

South32’s South African coal sales had increased 13% year-on-year to 18-million tonnes in 2015.

Fraser said continued improved capacity and reliability on the coal line to the Richards Bay Coal Terminal had been a boost for established companies in the coal industry, as well as an enabler for emerging miners.