India buying of Q4/Q1 S.Africa coal re-emerges

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LONDON, Sep 26 (Reuters) Strong buying interest for South African coal cargoes from India has re-emerged after the seasonal slowdown for the monsoon in July-September, traders said on Wednesday.

But they said the Indian buyers were finding availability extremely limited and delivered prices had risen since June.

''We are really struggling to find anything for prompt loading to buy from producers, from traders, from anybody. It doesn't matter if we try to buy fixed price or index-linked, it is very very tight,'' said one large Indian trader, which buys South African and Indonesian coan from a variety of suppliers.

''Freight costs are still very high, and coal prices are also high but I think the end-users will get used to paying 0, 0 or even higher delivered within months because they will have no choice - it's pay or get nothing,'' he said.

South African coal prices were around .00 a tonne free-on-board (DOB) Richards Bay in June but have been moving in a range .00-.00 a tonne during the past week.

Spot freight rates for panamax or handymax vessels from Richards Bay to east coast Indian ports are currently around .00-.00.

Traders and producers with a few spot cargoes available for Q4 and Q1 loading said they expected prices to reach .00 a tonne soon because demand had exceeded supply substantially.

Indian traders said there could be another two million tonnes of spot demand for South African coal for Q4 from India and a similar demand from Pakistan, where booming cement output is helping fuel the demand for coal.

OUTLOOK ''We are prepared to buy a large tonnage of coal for the next several months but not at these prices. We think the market will soften and we'll be able to buy at less than .00 again,'' another large Indian trader said.

Some European utilities may have surplus Q4 South African coal if the winter is mild but utilities said they are reluctant to sell Q4 cargoes now in case they need to buy them back later at a higher cost if the winter is cold.

In addition, the delays and disruption to Russian exports due to a shortage of rail cars is expected to continue through the first quarter.

Utilities said they will be more inclined to hold onto term supply of other origins of coal while Russian problems persist.

India's imports of South African coal are expected to reach 9-10 million tonnes this year, up from 3 million tonnes in 2006.

South Africa's total exports this year are forecast at 63-66 million tonnes, little changed from 2006's level.

Pakistan cement makers expect to import at least 4 million tonnes from South Africa in 2008, up from just under 2 million tonnes this year.

The vast majority of South Africa's coal is sold into the European market.

REUTERS SR ht2026

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