Coal prices around the world are gently sliding as demand from top importers such as China, India and even Europe remains subdued amid a so far mild northern winter. However, there is one exception.
South African coal export prices at Richards Bay have surged in recent months, defying market fundamentals and seemingly without logical explanation.
It's clear that the movements for South African coal are wildly out of step with what's going on in the other major regions, according to some price benchmarks.
There is no obvious fundamental reason why this should be the case.
There is neither supply shock for exports from Richards Bay, or a sudden surge in demand for either South African coal specifically, or coal from other exporters of a similar quality.
Richards Bay exports were 6.08 million tonnes in November, according to vessel-tracking and port data compiled by Refinitiv, down slightly from 6.89 million tonnes in October.
However, it's worth noting that October was the best month since December last year and November's exports were the fourth-highest for any month this year.
The bulk of South Africa's coal exports head to Asia, with India ranking as the biggest buyer.
India's imports of coal from all countries did tick up in November to 16.36 million tonnes from 14.78 million tonnes in October.
But the increase wasn't driven by additional demand for South African coal, with India's imports from Richards Bay coming in at 2.99 million tonnes in November, up slightly from 2.69 million in October.
If fundamentals can be ruled out as behind the increase in South African coal prices, the explanation most likely lies in trading tactics being used by market participants.
The motivation is likely to be to create arbitrage opportunities between physical and paper markets, or perhaps also to influence prices linked to longer-term contract negotiations.
While this may lead to winning some short-term profits, it risks damaging the longer-term integrity of the market.
There is little chance that buyers of South African coal across South Asia will accept paying a substantially higher price than what they could pay for similar quality Australian coal.
If the Richards Bay price continues to deviate from other prices, buyers will be reluctant to purchase South African cargoes, or demand a discount mechanism, or a switch to alternative pricing.
If an index price loses credibility or trustworthiness, it ceases to be of much use to the industry.
This is by no means a criticism of the methodology or integrity of compiling the indexes, which have robust procedures and checks in place.
If prices being offered and traded are genuine, there is little the price reporting agencies can do, especially if some players withdraw to the sidelines out of fear of taking losses, or a reduction in the liquidity in the market.
Overall, apart from possible short-term profits, there seems to be nothing to be gained by having one global coal price benchmark out of whack with the others.
It serves only to make coal an unattractive financial market, something an industry already under siege for its role in climate change would be best advised to avoid.
(Writing by Wenxin Wu Editing by Alex Guo)
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