As January rolls off the trading calendar, RB1 levels are shifting down towards $85. However, 2021 looks to be a bumper year for SA coal exports.
Most Asian countries are ramping up demand as new coal-fired capacity comes online, whilst countries such as India and Pakistan are experiencing higher demand from both the sponge iron and cement sectors. As expected, RBCT exported 70.2 Mmt of coal in 2020, owing to the drop in seaborne demand following the coronavirus pandemic.
This year the terminal is again targeting 77 Mmt, higher even than the previous record set in 2017. Assuming all goes well this is within reach, even if China does not shift towards more purchases of SA coal.
Domestic Chinese prices have come off rapidly from their highs seen early January, as warmer temperatures and lighter industrial activity precede the Chinese New Year break in mid-February. It’s likely that coal stocks at Chinese ports will increase significantly over February, pressuring coal prices well into March.
Within Europe, Poland is being pressured to give up its coal addiction, as the worst CO2 emitter, even as consumption in the country is falling by around 10% per year.
In South Africa, tropical storm Eloise passed without much disruption, although the threat of wet coal handling problems remains, as increased rain and flooding remain risks with La Niña.
As expected, choppy market conditions continue to prevail. February is trading significantly lower than the levels seen in January and this will put even more downside pressure on momentum.
However, should the sell-off not be too severe, this allows the bulls to return with a vengeance later on, as momentum will naturally recover once more.
For now, we would expect RB1 trading levels to stabilise at around $85 for the next week or so.