core sector communique

China, India Seeking Coal From South Africa

China and India, Asia’s two fastest- growing economies, are seeking to invest in coal assets in South Africa to diversify supplies after disruptions in output from Australia and Indonesia, said Universal Coal Ltd.

“China gets most of its coal from Australia, but because of the floods in Queensland, you’ll need time and money to rebuild that,” said Tony Harwood, chairman of the Sydney-listed developer of South African coal mines. “A new major market for coal from South Africa is India.”

Floods in Australia’s Queensland state shut coal mines and damaged infrastructure including ports and railroads, sending prices to a two-year high. India competes with China for supplies of coal, which is used for more than half of its power generation capacity.

Mining companies in India, a Chinese mining company and one in South Korea are in separate talks with Universal Coal for take-off agreements or investment, Harwood said in an interview at the Asian Mining Congress in Singapore.

India last year became the largest market for exports from South Africa, traditionally the main source of high-quality coal needed by western European power plants. Chinese investors are shifting focus from Australia to higher-risk destinations including Africa, Paul Murphy, head of Asia Pacific Mining & Metals at Ernst & Young said last month.

Supplementary Supply

India’s coal deficit may triple over the next five to seven years, a local unit of Moody’s Investors Service said in a report in February.

South Africa, which produces coal used by power stations and steelmakers, can supplement Indonesian supplies because of its relative proximity to India, Harwood said.

Rains have also crimped coal output in Colombia and Indonesia, pushing up power-station coal prices at Australia’s Newcastle port, an Asian benchmark, by about 26 percent over the past six months to $122 a metric ton. The cost reached $138.50 a ton in the week ended Jan. 14, the highest since September 2008.

Indonesia, the world’s largest exporter of power-plant coal, is considering restrictions on mineral exports to safeguard its economy.

India’s coal imports may rise to 600 million tons in 2030 from 2010’s 85 million tons, Kolkata-based mjunction services Ltd., a web-based commodity trader, said in a February presentation.

China purchased a record 165 million tons of coal in 2010 from countries including Australia and Indonesia, data from Chinese customs show. Imports from Australia dropped 24 percent in January from a year earlier.