FOB RBCT is back over $100/t, for the first time since October 2018. However, RB1 coal prices in rand terms have reached an all-time high, at around R1 500/t. The bulls are truly back in the driving seat with physical premiums for RB1 at around $6 higher than paper prices.

Of course, much of this is a knock-on effect from the Australian floods, having caused rail delays to Newcastle port.

However, Chinese domestic coal prices are also robust, whilst gas and power prices are also on the rise. The dollar continues to weaken, adding further upwards pressure to all commodities. As BHP looks to
advance its migration from coal to potash, one wonders why South African coal producers don’t realise that they are already sitting on huge organic fertilizer potential, as part of a just transition, at least as
revenue generating as coal.

As farming is the major economic activity in Mpumalanga after coal, this is easily a no-brainer opportunity, helping to rehabilitate mines at the same time.

Meanwhile, China burned more than 52% of all the world’s coal last year, and other Asian nations such as South Korea, Japan, Taiwan, Vietnam etc. don’t look like cutting their coal usage any time soon either.

With South Africa continuing to experience some of its worst load-shedding ever, South Africa’s Environment, Forestry and Fisheries Minister Barbara Creecy has said that environmental legislation will shortly be introduced to provide a transition path towards a low carbon economy. Eskom, for its part, is repurposing retiring coal power plants by adding solar photovoltaic and battery storage.

Our prediction of $100 came true a lot faster than expected. The bulls are clearly back in the driving seat, with the bears having hardly had a turn at the wheel. However, with trend still quite overbought, we’re unsure as to how long this little pop will last.

As the dollar continues to weaken and the threat of inflation arises (with commodity markets always being the cheerleaders) there are indeed structural changes afoot. China hopes to launch its e-RMB on the world at the Beijing Winter Olympics next year, but it seems that most traders are still not prepared to move to RMB, never mind a digital one.

Meanwhile, a flying coal price cannot be good for longer term demand, especially as European carbon, gas and power prices remain stacked against coal longer term.

It looks like the current high price will provide the perfect exit point for mining houses looking to leave coal (and their environmental liabilities) behind. History will not speak well of this.