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Pakistan eyeing countries like Afghanistan, Tajikistan
Domestic coal shortage hurts power supply
CFR Pakistan 5,750 kg/kcal NAR coal at $366.05/mt April 20
Thermal coal buyers in Pakistan are looking for a substitute of the South African material as prices of the fuel have remained elevated since early 2022 and an imminent power crisis has created a higher-than-usual domestic demand, market sources told S&P Global Commodity Insights in the week to April 21.
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Sources said Pakistan is looking at countries like Afghanistan and Tajikistan given the significant price difference compared to the South African coal, which accounts for around 70% of Pakistan’s imports.
The country is also looking at other sources like Mozambique, meanwhile, as power plants and cement manufacturers grapple with insufficient stocks.
“Pakistan has been importing from Afghanistan … due to lower prices. The high-CV 6,000 kcal/kg NAR coal turns out to be almost $50-$60/mt cheaper than the South African coal,” a Pakistan-based trader said.
According to data from S&P Global, the price of South African 5,500 kcal/kg NAR coal rose 156.35% from $107.45/mt FOB on Jan. 4 to $275.45/mt FOB April 20.
CFR Pakistan thermal coal 5,750 kg/kcal NAR reached a historical high on March 2 at $457.95/mt, up $127.95 on the day. This is the highest the price has been assessed at since S&P Global started collecting data on June 1, 2020, when the price was $61.50/mt.
Supply from South Africa has remained tight since late last year due to civil unrest in the country. The situation was further aggravated this year as European demand poured in to replace Russian tonnages banned by the EU to protest Moscow’s invasion of Ukraine.
The latest data available from World Trade Statistics showed South Africa supplied 839,322 mt to Pakistan in December 2021, down 13% on the month and 32% on the year.
Imports from Indonesia were at 104,858 mt in December 2021, up 1% on the month and down 55% on the year, while supply from Australia significantly dropped to a mere 377 mt, down from 113,552 mt in November 2021 and lower from 224,613 mt in December 2020.
“A lot of textiles players have switched to coal. The power sector is still buying coal and cement is using a mix of other imported and Afghanistan material. Afghanistan’s material is still coming in steady,” a Pakistan-based source said.
Market participants estimated Pakistan annual demand to be around 16 million mt. Over the past six months, about two million mt of Afghanistan coal was heard being bought by the country.
Energy crisis
Amid the escalating prices across the commodity and energy markets, Pakistan is now enduring a power crisis as the “cash strapped” country is unable to fulfill needs for its power plants, sources said.
“The country has been turning off power at homes and buildings as they cannot afford to import high levels of coal or gas to power its plants,” a US-based trader said, adding Pakistan relies on only around 5% of domestic coal supply, which cannot fulfil its needs.
“I think you will find this to be the case for many countries around the world if these prices do not correct by 20%,” the trader said.
“Buyers want a price of at least $250/mt for the South African coal, until then no one can think of buying,” a Pakistan-based trader said.
S&P Global assessed the CFR Pakistan thermal coal 5,750 kg/kcal NAR at $366.05/mt April 20, up $8.10/mt on the day. The freight rate from Richards Bay, South Africa, to Port Qasim, Pakistan, on a Supramax basis was at $31.05/mt, flat on the day.
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