Export thermal coal prices are rising, which is good news for South African coal exporters as Transnet Freight Rail (TFR) finally gets its act together on railage volumes to Richards Bay, www. miningmx.com writes.
According to RBC Capital Markets (RBC), thermal coal prices have risen sharply since mid-October, setting a series of year-to-date peaks while indications were that contracts for 2011 delivery were being settled at around $115 per tonne.
RBC cited unconfirmed reports that Tokyo Electric Power Company - the largest electric utility in Japan and the fourth-largest in the world – had settled 2011 thermal coal contracts with Xstrata at $115/t, compared with $98/t for 2010.
That’s good news for the Richards Bay Coal Terminal (RBCT), where export volumes should improved markedly during 2011 provided TFR can maintain its restored performance levels.
Turning to diamonds, RBC analyst Des Kilalea pointed out rough diamond prices have been strong all year and were closing 2010 at levels above those ruling before the market crisis of late 2008.
He estimated De Beers sales for 2010 would increase to about 55% above 2009 levels, reaching around $5bn.
Kilalea said: "In large part the strength in rough has been driven by restricted production and sales from De Beers and disciplined selling by Alrosa, the Russian producer.”
A key issue for the future welfare of the diamond business is that the consumer market for polished stones has not recovered anything like the rough diamond market.
Despite this, Kilalea said: "We believe the prospects for the global rough diamond sector remain good. New-mined supply is not growing and, other than a stockpile of about $1bn held by the Russian Treasury, there are no significant above-ground inventories in rough.
“The state of the polished stocks is more fluid as rough bought at high prices will swell inventories until the diamonds are sold into the retail market.
“This could inhibit sales of rough in the near term, but our view is that the medium-term outlook suggests an upward trend in rough diamond prices.”
