Coal Rises the Most in Three Weeks as South African Mines Shut

European coal prices rose the most in almost three weeks as Anglo American Plc and other mining companies shut production in South Africa because of power cuts.

More than a quarter of Europe’s energy coal is shipped from Richards Bay, South Africa. Anglo American, the second-biggest coal producer in the country, stopped five of its nine mines after state utility Eskom Holdings Ltd. said it couldn’t guarantee electricity supply.
“It seems as if it’s going to be pretty chronic,” Walter de Wet, head of commodity research at Standard Bank Group Ltd. in Johannesburg, said in a telephone interview today. Cuts and rationing may occur “for a couple of years. I would definitely not be bearish” on coal, he said.

Eskom told miners that production may have to be curbed for two to six weeks, on the day that China, the world’s biggest coal producer, ordered domestic shippers to halt exports next month and in March to ease shortages. In Australia, the world’s biggest energy coal exporter, rains disrupted mining in Queensland and Macarthur Coal Ltd. said it may miss contracted deliveries.

Coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year rose $6, or 5.7 percent, to $112.25 a metric ton as of 5:20 p.m. in London, according to ICAP Plc prices. It was the biggest gain since Jan. 7. Coal is trading about 5 percent below the record it reached Nov. 23.

Coal stockpiles at Richards Bay are about 2.1 million tons, the terminal’s Managing Director Kuseni Dlamini said by telephone today. The terminal aims to have stockpiles of 3 to 4 million tons, he said. Eskom may burn more coal as it seeks to increase power production. That may reduce supplies of the fuel for export from South Africa, Standard Bank’s de Wet said.

The problems in South Africa may bolster coal prices globally, London-based investment bank Fairfax I.S. Plc said.

“If electric coal trains into Richards Bay coal terminal are cut for a significant period then coal-fired power stations around the world will need to find alternative supply,” John Meyer, an analyst at Fairfax, said in a report. “That could cause a major spike in coal prices.”

Bloomberg