South Africa's logistics hurdles turn boon for growing Indian appetite: S&P GCI

New Delhi [India], February 9 : South Africa's thermal coal exports soared by 74 per cent year-on-year in November and December, defying logistical and operational hurdles, and fueling India's growing appetite for the commodity.
Despite facing severe weather conditions and shipping disruptions, the nation's coal exports to India remained robust, offering competitive pricing to power plants and sponge-iron buyers.
According to data from S&P Global Commodities at Sea, South Africa's thermal coal exports fluctuated between 59 to 60 million metric tons over the past year, slightly lower than pre-pandemic levels.
Yet, with aging power stations hampering domestic transmission infrastructure, exports emerged as a vital revenue stream for the nation.
India, one of the world's major coal importers, witnessed a significant increase in thermal coal imports, reaching 180 million metric tons in 2023, compared to 165.4 million metric tons in the previous year.
This surge, driven by heightened economic activity and industrial demand, saw South Africa regain its prominence among Indian buyers, especially after Russian coal fell out of favor.
Despite lingering challenges in South Africa's logistical chain, including issues with Transnet, the country's major logistical operator, efforts to streamline operations have shown promise.
Transnet's recovery plan, which involves increasing train frequencies along crucial routes to Richards Bay Coal Terminal, has already yielded positive results, with loading volumes improving at the terminal.
The drop in prices towards the end of 2023 further incentivized Indian buyers to opt for South African coal, with Free on Board (FOB) Richards Bay 5,500 kcal/kg NAR price hitting its lowest level since May 2021.
This favorable pricing, coupled with South Africa's specifications, particularly for high-CV coal, made it an attractive option for blending purposes in India.
Market participants remain optimistic about South Africa's role in supplying thermal coal to India, as the latter aims to surpass 1 billion metric tons of coal production in the current year.
Despite ongoing challenges, investments in infrastructure development and maintenance are crucial in ensuring the competitiveness of South African coal in the global market.
As India continues to rely on coal for its energy needs, the symbiotic relationship between South Africa's coal exports and India's growing demand underscores the resilience of the thermal coal market amidst logistical complexities and evolving global dynamics.