Cape Town - India could become a major new force in the consumption of South African coal between 2015 and 2020 on the back of demand from that country's growing power sector, McCloskey Group chairman Gerard McCloskey said yesterday.
During that period the global market for thermal coal, which is used to fire power stations, was expected to grow from 515 million tons to as much as 800 million tons, he added.
Coal UK and Steam Coal Forecaster editor David Price said that last year India imported about 30 million tons of thermal coal, of which 2.5 million tons came from South Africa.
"There is going to be huge growth from the Indian market," Price said on the sidelines of McCloskey's second South African coal exports conference.
South African coal would compete with coal from Indonesia for the India business, he added.
Close to 90 percent of South Africa's coal currently goes to European power stations. Bloomberg reports that South Africa shipped 54.1 million tons of thermal coal to Europe last year, while 6.52 million tons went to the Middle East, according to the the Chamber of Mines.
Asia was the third-biggest importer with 4.08 million tons, followed by other African countries at 3.45 million tons and North and South America at a total of 1.03 million.
However, McCloskey forecast that European Atlantic demand for coal would fall this year by almost 7 million tons.
McCloskey said increasing demand from India was likely to come from its power sector: by the 2020s, it would seek 100 million tons a year of thermal coal for four power stations of 4 000 megawatts each.
"The key market for the South Africa expansion in export capacity will be India."
Xavier Prevost, a mineral economist in the department of minerals and energy, expects South African saleable coal output to climb 18 percent from 245 million tons in 2005 to 290 million tons in 2010.
Prevost said the increase in output would be driven by the expansion in the Richards Bay Coal Terminal as well as growing demand from Eskom.
Other Asian countries could also become long-term buyers of South African coal, McCloskey said. "South African coal suppliers could be an increasing swing factor in Asia."
Bloomberg reports that South Korea may seek more shipments from South Africa as the Asian country loses access to traditional suppliers in China.
According to Bloomberg, Johan Myburgh, marketing manager at Exxaro Resources' coal unit, said: "China is a bigger factor that we thought.
"The coal price is holding up at a strong average of $50 a ton."
Coal shipped from Richards Bay on a free-on-board basis, which excludes insurance and freight, traded at an average $51.22 a ton in the past year, according to Bloomberg data sourced from McCloskey.
Coal traded at $49.63 a ton on January 12, the last available price.