Coal news and updates

Drummond disruptions major catalyst for firmness in Q1 pricing

January 20: The disruptions in loading from Colombia's Drummond mines following a government order have been the major catalyst for strong first quarter pricing of South African coal, an official from a leading coal miner in South Africa told ICMW.

"It was a catalyst with European utilities forced to cover shorts," the official said.

"The influence of a large European trading house buying and importing large volumes of RB1 into Europe has also supported price levels," the official added.

The price of standard South African coal (6000 Kcal/kg NAR) has spurted to $86.70 per ton fob as on January 17, 2014 from a low of $82.00 per ton on January 8.

Incidentally, South African coal prices had been fluctuating sharply since the second week of December after reports came in that loading from Drummond is likely to be severely affected from January 2014 after the government there had refused to extend the December 2013 deadline for installation of automatic covered conveyor belt loading to reduce pollution.

However, the prices softened later on during the month after fresh reports suggested that the Colombian government would allow Drummond to load the material on payment of some penalty.

But soon it was clarified by the Colombian government, in view of the opposition within the country, that loading will not be permitted despite the payment of penalty.

Drummond had been asked by Colombian government to install covered conveyor belts for loading of coal onto ships and was given time till December 2013 to complete the job. The project was delayed by a few months and it is now likely to be operational only in March 2014, sources said.

"Till then, South African coal prices are likely to remain firm, but after that there will be considerable decline in prices because there would be significant increase in the availability of coal, particularly for Europe once Drummond's covered conveyor belt system is in operation," said industry sources.

"Drummond would be able to despatch as much as 20 million tons of coal annually once the automatic covered conveyor belt is in operation," a source in India said.