India set to displace Europe as largest coal buyer from S. Africa

Power-hungry India is poised to displace Europe as the largest buyer of coal from South Africa as the country adds new thermal capacities to meet its growing energy demand.Indian imports of coal from the Richards Bay Coal Terminal (RCBT) in South Africa have surged in the past two years, on the back of rising demand for quality coal from power companies here. India buys about a fourth of its coal from South Africa, while the rest is imported from Indonesia.

Platts, leading energy information provider, estimates that India's coal imports from RCBT have grown by 160 per cent from 6.8 million in 2008 to 17.7 million tonnes in 2009. At the same time, European imports from RCBT have declined 28 per cent to 28.1 million tonnes in 2009 from 38.9 million tonnes in 2008.

Europe accounted for 63 per cent of RCBT's total exports in 2008 and its share has since declined to 46 per cent in 2009, while India's share has increased from 11 per cent in 2008 to 29 per cent in 2009.

“Europe, a major coal importer from South Africa, is being constrained. To burn a tonne of coal costs more in Europe than anywhere else because of the emission factor. This means a lot of cheap gas is flowing into Europe at the moment,” said Mr James O'Connell, Managing Editor of Platts International Coal.“It is far more cost effective to burn gas and many of the power plants can switch between gas and coal,” he added. Predicting that India's imports from RCBT would be on par with Europe this year, Mr O'Connell said, “It could be an even match this year. It is possible that 2011 will see India emerging as the largest importer from RCBT”.

Further, India's share has increased in RCBT's exports in the current year. “India accounted for 44 per cent of RCBT's exports in April-May this year, approximately at 2 to 3 tonnes a month,” Mr O'Connell said.

Citing a Credit Suisse forecast, Mr O'Connell said that up to five million tonnes of coal that went to Europe last year from RCBT, could find a different home this year.“I would speculate that home would be India, which is the most active player in the world coal market,” Mr O'Connell added.