CAPE TOWN (miningweekly.com) – South Africa should move more aggressively to export coal to India, as well as look for opportunities in other emerging markets, suggests Macquarie Group global commodities research head Colin Hamilton.
He told delegates at the Mining Indaba in Cape Town that India was a good option, as it did not have enough coal to keep up with the growing domestic demand for coal.
“We think India will remain a positive story for seaborne demand as domestic supply lags demand growth,” said Hamilton.
Coal India was targeting the production of one-billion tonnes of coal by 2020 but the restructuring of the Indian coal mining sector was still some way off.
China, in contrast, had very strong domestic coal production coupled with a protectionist policy.
South Africa is the world’s fourth-largest exporter, supplying both the Atlantic and Pacific. Hamilton said 90% of South Africa’s coal exports used to go to Europe, but, with policy changes, the country was now exporting more to the Pacific basin.
South Africa exports around 30% of the thermal coal it produces.
Unlike countries like Columbia, Indonesia and Australia, which are far closer to their export markets, South Africa faces geographical challenges, with high pit-to-port transport distances. In terms of transportation costs, South Africa lags behind Indonesia and Australia.
“Everyone is trying to cut costs and lower freight rates,” said Hamilton.