Bloomberg News

South African Coal Has First Gain in Four Weeks on China Buying

June 06, 2011

June 6 (Bloomberg) -- Coal export prices gained for the first time in four weeks at South Africa’s Richards Bay terminal as China, the world’s biggest consumer of the fuel, accelerated buying in the face of power shortages.

Prices at Richards Bay, the continent’s largest facility for shipping coal, rose 0.2 percent on average in the four days to June 3 to $118.49 a metric ton, according to data from Petersfield, England-based researcher IHS McCloskey. China boosted its coal imports 64 percent in the two months through April.

“Demand for good quality coal from China and India has come back and we have seen a stabilization and a bit of an uptick of prices,” Amrita Sen, a commodities analyst with Barclays Capital in London, said today by phone.

China faces a power shortfall that may extend to 40 gigawatts this summer, surpassing the country’s 2004 record, according to State Grid Corp. of China. A gigawatt is enough to supply 1 million U.S. households on average. The shortage is hurting output at some factories and may cut demand for raw materials from the Asian country, the biggest consumer of commodities including copper, coal and iron ore.

China, the biggest steelmaker, may cut output of the material this month as a result of power rationing, RS Platou Markets AS in Oslo said on May 25. More iron ore, a steelmaking ingredient, is hauled at sea than any other dry-bulk commodity, accounting for 43 percent of the total, according to estimates from Clarkson Plc, the world’s biggest shipbroker.

Power Shortages

VM Group described the situation in China as “the mother of all power shortages” in a June 2 report. The crisis will divert water from farms to supply power plants and drive food costs higher, it said. Food prices last month rose near a record set in February as dry weather in China, the U.S. and Western Europe curbed global grain production. Corn prices in Chicago have more than doubled in the past year and wheat is up 76 percent.

Power-coal demand may also rise after Germany’s cabinet backed plans to close the country’s nuclear power plants by 2022. The move will make Germany the biggest nation to swear off nuclear power after this year’s meltdown at Japan’s Fukushima Dai-Ichi following the country’s earthquake and tsunami.

Japan’s imports of power-coal will expand 1 percent this year after the March 11 disaster, Clarkson estimates. The world’s biggest importer of the fuel will take delivery of 126.2 million tons in 2011, up from 125 million tons in 2010. It had predicted a 1 percent decline.

Asian Benchmark

Power-station coal prices at Australia’s Newcastle port, an Asian benchmark, fell 0.1 percent in the week ended June 3. Prices at the New South Wales port decreased to $119.34 a ton, according to the globalCOAL NEWC Index.

European coal derivatives advanced. Coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year gained 75 cents, or 0.6 percent, to $129.50 a ton by 4:50 p.m. in London.

Profit from running coal-fired power plants for next month, the so-called clean-dark spread, is about 7.68 euros ($11.24) a megawatt-hour, compared with 3.12 euros from burning natural gas, Bloomberg data showed. The calculation uses electricity prices in Germany and takes emission costs into account.

December carbon-dioxide permits under the European Union cap-and-trade system fell 0.9 percent to 16.68 euros. Gas for delivery in the six months through September 2012 to the U.K., Europe’s biggest consumer of the fuel, rose 0.6 percent to 65.80 pence ($1.08) a therm in London.

--Editors: John Deane, Sharon Lindores

To contact the reporter on this story: Alistair Holloway in London at aholloway1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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