This Mystery Points to Big Changes Afoot for Coal

Mysterious news out of South Africa this week.

Platts reports that coal stocks at the country's Richards Bay Coal Terminal hit an all-time high in September. At 5.5 million tonnes, coal inventories at the port were up 18.2% from August. And now stand 39% higher than a year ago.

That means a lot of coal is piling up here. Seeming to suggest that sales must be slowing.

But the data debunk such an explanation. So far in 2013, Richards Bay has shipped nearly 50 million tonnes of coal. Up about 500,000 tonnes from the same period last year.

So sales aren't slowing down. In fact, they're quite brisk--underpinned by shipments to the "South Asia" region dominated by India. This sphere accounted for over one-third of all Richards Bay's shipments so far in 2013.

In fact Mining Weekly recently interviewed coal insiders who suggested that South Africa could "become the preferred supplier of energy coal to the [Indian] subcontinent for geographical and coal quality reasons."

South Africa's coal miners are apparently paying attention to such sentiment. If coal shipments are still strong, the rising stocks at Richards Bay can only mean that South African coal output is growing. Indeed, recent mine expansions like Anglo Coal's 11 million tonne-per-year New Largo project are some of the largest new coal production centers the nation has seen for some time.

If production is indeed ramping up, it's a big change for the coal industry. South Africa was one of the only major coal producing nations that's been unable to increase output over the last decade. Between 2001 and 2011, the country's production grew only 4%. As other big coal exporters like Indonesia raised output by 375%.

The big stock build at Richards also suggests South Africa's infrastructure may be struggling to keep up with rising amounts of new coal. Road, rail and port are going to be a critical consideration for any producer, new or old, who wants to raise output to cash in on surging demand in places like India.

Here's to a good mystery,

By. Dave Forest