At least two South Korean power generators said they aim to buy coal from South Africa despite the distance and costly freight as utilities face delays from regular suppliers.
Coal is taking longer to arrive from China, Australia, Indonesia and Russia due to growing domestic demand in those countries.
An official at Korea South-East Power (Kosep) said the power generator was likely to receive SA volumes when rewarding its recent tender that closed last week.
Korea Southern Power (Kospo) is also considering buying SA volumes as loading of supplies are being delayed in Australia, another trading source said.
”South Korean ships usually have to wait in the ports in Australia for more than 20 days on average to be loaded,” said a Kospo official.
Since the duration is longer than the travel time needed for African deliveries to arrive in South Korea, utilities are encouraged to turn to SA coal despite higher freight, the official said.
Kospo, which has enough vessels to travel long distances, is in the forefront in seeking SA cargoes, another trading source said.
The source added that since the Asian market was growing strong, SA was likely to be lenient in negotiating the shipping costs with Japan and South Korea.
Bidding prices were not confirmed by the two utilities but an industry trading source said SA coal costs on average $53 a tonne. Benchmark Australian spot thermal coal prices are at $53,25.
South Korea’s five state utilities owned by Korea Electric Power — South-East Power, Western Power, Southern Power, Korea East-West Power and Midland Power — burned around 52-million tonnes of coal in 2006.
South Korean utilities have burned a high proportion of comparatively low calorific value Indonesian coal blended with higher quality Chinese material, exporters and traders said.
Spot and term prices of Indonesian, Australian and Russian coal have risen and will likely continue to climb, producers and traders said, because supplies are tight and Asian demand is soaring. – Reuters