Melbourne/Mumbai: Global thermal coal prices may rise if South Africa decides to limit exports, an analyst at National Australia Bank Ltd (NAB) said.
“This is going to have a fairly significant impact as South Africa is a key exporter in the thermal coal market,” Gerard Burg, a minerals and energy economist at NAB in Melbourne, said in a phone interview on Tuesday.
South Africa, the world’s third largest thermal coal exporter, is developing a strategy that may limit shipments to help ease a domestic power crisis, Bheki Khumalo, a spokesman for the department of minerals and energy, said in an interview on Monday.
Coal prices have surged this year on supply constraints in Australia and South Africa and increased domestic demand in China and India.
Any further rise in global coal prices will be a cause for “grave concern” to Indian importers, said R.S. Sharma, chairman of NTPC Ltd, the nation’s biggest power generator. The company plans to import more than five million tonnes of coal in the year to March 2009, Sharma said in a phone interview.
“If a supplier the size of South Africa cuts exports, it’s going to raise prices and hurt everyone’s plans,” he said.
The company, which reported a 39% drop in profit in the quarter ended 31 March, needs to ensure coal supplies to meet its target of almost doubling capacity to 51,000MW in the next four years. NTPC plans to invest as much as $1.3 billion (Rs5,551 crore) buying stakes in coal mines abroad.
Any cut in coal exports from South Africa will result in European consumers seeking volumes elsewhere, NAB’s Burg said.
“Producers in Australia and Indonesia will be the key winners, but there are obviously some question marks as to how much producers in the region can really increase supply. It may simply be a price effect more than anything else,” he added. South Africa’s energy regulator said on Monday that the government should investigate why state-run Eskom Holdings Ltd exported double the power it needed to during a local electricity shortage that cost the economy about 50 billion rand (Rs28,500 crore).
Eskom missed its own target for increasing coal stocks to a minimum of 20 days of use by 30 April.