South African coal exports fell by 14pc on the year in March, and the short-term outlook for loadings appears bleak amid severe demand-side curbs.
The Richards Bay Coal Terminal (RBCT) exported 5.8mn t last month, down by 950,000t on the year and 12pc below the March average in 2015-19. And exports are poised to fall further. Activity has slowed following a flurry of loadings at the start of April. Four vessels were being loaded at RBCT as of 12:00 GMT on 16 April, according to ship-tracking data. But just five bulk carriers were in the queue outside the port — three Panamax and two Handysize vessels — down from more than 20 a couple of weeks ago.
RBCT operations briefly halted at the end of March as the government imposed a lockdown to contain the spread of Covid-19. But operations soon resumed, albeit at a reduced rate, as miners received government exemptions for strategic exports. The lockdown, which began on 26 March, has since been extended until 30 April.
Despite supply-side restrictions in South Africa, with a number of mines placed on care and maintenance, there does not appear to be a shortage of supply for export.
Trains transporting coal continue to arrive at RBCT and stocks have recovered to 4.4mn t, up by 890,000t on the week — the highest level since October 2019.
Rather, it is the demand-side cuts in south Asia that have primarily driven the reduced export activity. On 14 April, prime minister Narendra Modi extended India's national lockdown until 3 May, although certain economic activities will be permitted from next week.
Indian thermal coal imports could drop by 15mn t on the year to 170mn t in 2020, while South African exports could decline by 5mn t to 71mn t, according to the latest Argus Seaborne Coal Outlook.
Declining prices should improve South African suppliers' competitiveness, but prices elsewhere have also fallen (see chart). A depreciation in the Russian rouble could also complicate South African efforts to diversify into non-Indian markets.
South African export prices have slumped in recent weeks, with Argus' fob Richards Bay NAR 6,000kcal/kg assessment shedding $27.76/t between 27 March-15 April. Discounts for off-specification NAR 4,800kcal/kg and NAR 5,500kcal/kg coal have also widened, owing to weak demand.
March export breakdown
The decline in RBCT's March exports was driven by lower flows to India and South Korea, although loadings for Vietnam and Sri Lanka rose.
Exports to India declined by 25.3pc on the year to 3.3mn t and are likely to drop sharply this month due to a collapse in both power-sector coal demand and consumption from the cement and sponge iron industries. India accounted for a 56pc share of South African exports in March, broadly in line with the 2019 average.
Loadings for South Korea were zero for a third consecutive month, down from 320,155t a year earlier. Restrictions to slow the spread of Covid-19 have weighed on South Korean electricity demand recently, compounded by unseasonably mild temperatures. And while spot prices currently favour coal burn over gas in the country's power mix, a prolonged spell of low oil prices may enhance the profitability of LNG imports.
Loadings for Sri Lanka surged by 374,652t to a 490,297t, the highest since November 2018, and exports to Vietnam jumped by 479,694t on the year to a record 539,084t. Vietnamese power production rose to 54TWh in the first quarter, up from 50.3TWh a year earlier, while the country commissioned 1.2GW of new coal-fired generation capacity last year and is set to bring an additional 2.1GW on line this year. First quarter RBCT loadings dipped by 1.5pc to 16.5mn t.