Crude and natgas prices stabilised over the week, with EU emissions prices also recovering from their lows end March. However, it remains a torrid time for SA coal exporters as demand for spot physical cargoes evaporates.
The RB1 physical discount to paper widened dramatically as RBCT stocks increased to over 4.4 Mmt, up by almost 900kt on the week. Indian and Asian demand destruction remains the key driver, with Indian imports likely to drop by around 15 Mmt over 2020.
SA exports may also decline by around 5–6 Mmt this year. However, once again the weakness of the Rand is helping SA miners to remain competitive on the world stage. Russia’s Rouble has also shifted weaker however, and Russia typically also benefits from its freight advantage into Asia.
According to Eskom’s CEO, Andre de Ruyter, the utility will be looking carefully at its short and medium-term coal contracts, struck at much higher levels in the recent past, which compare unfavourably with its older cost-plus and fixed-price coal contracts.
Whilst the utility does not currently see the need to approach government for further funding, an interesting option available to it is to raise green-funding as its older coal-fired units retire over the next few years.