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Demand for South African thermal coal up after price correction

South African thermal coal is becoming a more attractive option to traders and buyers as prices for all grades ease from record highs in July, sources told S&P Global Platts.

Platts FOB Richards Bay 5,500 kcal/kg NAR price was assessed at $90.40/mt on July 9, the highest value since the assessment began in 2013. The price had since softened to $76.35/mt as of Thursday.

Such high levels kept South African coal uncompetitive against most other origins for the key markets of South and East Asia, which resulted in rising stockpiles at the country’s main export terminal, Richards Bay Coal Terminal.

As of Friday, stocks at RBCT were 5.46 million mt, up from 3.4 million mt at the start of August and above the ideal operational level of 3-4 million mt preferred by the terminal.

“South African coal became attractive again with discounts,” a European trader said. The source had previously avoided trading South African coal, saying it could not find any buyer due to the high prices.

The source purchased a 50,000 mt October cargo of 5,700 kcal/kg NAR coal at a $6.75/mt discount to the corresponding financial 6,000 kcal/kg NAR contract – the pricing mechanism for all grades of South African coal.

The source said at this discount level buyers in the MENA region would be willing to step forward.

A second deal was heard for 50,000 mt of 5,700 kcal/kg NAR coal on Friday, this time for September at a wider discount of $8.25/mt.

A well-known producer-trader was also heard to be selling cargoes of 5,500 kcal/kg NAR coal at a discount of $22/mt to the index price, well below the published values of $15/mt.

A buyer in Pakistan was heard looking for 30,000 mt of South African thermal coal with a heating value of 6,000 kcal/kg NAR. The buyer had previous looked to switch supply to either US or Russian low sulfur coals between March-July this year, quoting South African prices in excess of $100/mt FOB Richards Bay.

A US trader, who had been selling to the buyer in Pakistan, said his recent offer had been turned down, with the buyer telling him South African coal was once again its preferred origin.

Source: Platts

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