Weekly SA Coal Report
With Chinese coal miners working flat out to avoid load shedding this coming winter, India is the latest country to face a power crisis, with more than half its coal power plants having less than three days of stocks.
Coal India has failed to ramp up domestic supplies as the economy recovered. With high demand, low stockpiles, and constrained global supplies, it is no wonder that coal prices have spiked upwards, notable as the October rollover kicked in.
This has significantly increased the export premium that SA coal exporters enjoy, with comfortable local supply in the Witbank area, even as train availability starts to improve.
As China is no longer financing offshore coal-fired power, other countries are considering delaying plant closures, with Drax ready to stay open in the UK if required. As power cuts hit China’s North East provinces, utilities are being directed to secure coal “at any cost” to guarantee winter heat and electricity.
The last time global energy prices hit these highs was just before the GFC in 2008, as households were unable to afford higher inflation and energy costs. We are significantly higher now.
Either way, when prices finally subside, the sell-off will likely be quite fast, although unlikely to get back to the low prices we saw just 12 short months ago. This is due to the structural supply cuts that are imminent in the next few years as the exploration pipeline has all but died, especially in South Africa.
In an interesting move, Glencore has taken the lead in the “Just Transition” as it trials wheat production as part of its rehabilitation plants for Umsimbithi’s Wonderfontein colliery. As we have long called for now, it seems that Glencore might become one of the first regenerative coal miners, as well as trade wheat.
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