China buying South African coal ‘could be game-changer but we shouldn’t be complacent’

  • Jan 14, 2021
  • Engineering News

JOHANNESBURG (miningweekly.com) – Normally, China does not import coal from South Africa, but 2021 has seen a seismic shift.

Shipments to mainland China are up 100% to around 3.7-million tonnes a year, African Source Markets’ Weekly Coal Index Report reported on Monday.

“It could be a game-changer but we shouldn’t be too complacent,” said African Source Markets CEO Bevan Jones.

China’s power plants have been permitted to import coal from several countries without clearance restrictions, The Global Times of China has reported. This has resulted in 2021 starting on a bullish note for South African coal.

“I’m not sure how sustainable it is as a trend. Obviously, it’s on the back of the Australian ban. Assuming that comes right, then the Australians will obviously enjoy a competitive advantage once more, because of the freight rates.

“The Chinese buyers have normally not really taken South African material and have typically tended to favour Australian coal. But they don’t seem to be too concerned when it comes to price, and it could be a game-changer for South African coal exports.

“But all those Far East Asian markets are up for grabs. Whilst the South Africans are chasing the Chinese buyers, the Australians are chasing our existing Indian buyers. There’s fighting over various different market shares going on, so we shouldn’t be too complacent about it being all sunshine and roses because now there’s this wonderful new market. It’s putting pressure on our existing Indian, Pakistan and Sri Lankan markets as well,” Jones told Mining Weekly.

Exports of thermal coal to China were worth $4-billion to Australia in 2019 – and the combined export revenue received by Australia from China for both thermal coal and metallurgical coal in that year totalled $13.7-billion.

On the potential for Australia’s coal export loss to China becoming South Africa’s coal export gain, the coal team at Anglo American said: “To some extent, yes. China has been buying more Indonesian and Russian but several cargoes per month of South African have been reported sold into to China for Q1.” 

The Anglo team added, however, that trace elements were always an issue for importers, which excluded certain coals from being able to move to China: “Some South African coals can qualify but certainly trace elements remain a barrier to entry into the Chinese market.” 

China last bought coal from South Africa in decent volumes in 2014. After that, import duties were applied and in 2015, trace element restrictions imposed.

The response of Richards Bay Coal Terminal (RBCT) was that it was not in a position to comment: “We’ll be releasing our annual data during January, which will show the geographical supply out of South Africa over the past 12 months. Any current changes would need to be provided by the coal exporters themselves, as to the trend,” RBCT added.

Data compiled by Refinitiv showed China’s imports from Australia to be a mere 447 523 t in December, the lowest since the global provider of financial market data started compiling vessel-tracking statistics and port particulars in January 2015.

In November, Bloomberg reported that more than 60 vessels carrying Australian coal had been refused permission to offload their cargo, and then in December, thermal coal exports to China from Australia's busiest coal terminal of Newcastle stopped completely.

Meanwhile, Reuters reports that demand is up owing to the colder-than-usual weather across much of north Asia as well as limited availability of spot cargoes of liquefied natural gas for gas-fired power generation.