Indian coal buyers struggle to find South Africa partners

Indian coal buyers struggle to find South Africa partners

Indian industrial users are keen to invest in South Africa’s coal mining sector but say they have been frustrated by the struggle to find suitable partners.

India imported just over three million tonnes of coal from South Africa in 2006 and is likely to take double that if it is available this year, Indian buyers attending an industry conference said.

Speaking on condition of anonymity, a number of would-be Indian investors said forming links with black-owned or black-controlled Black Economic Empowerment (BEE) producers was part of their frustration.

“We know that in South Africa we need a Black Economic Empowerment majority partner and we don’t want to buy any assets outright,” one major Indian coal importer said.

“But the difficulty we’re facing is finding the right investment,” he added. “Either we find that the coal quality is poor or we’re not comfortable with the people involved.”

“We’ve been looking for over a year now for opportunities in South Africa, whether to buy into mines or buy coal discard dumps to wash the coal and bring it to India or for long-term supply agreements — but we haven’t found anything yet,” another major Indian coal importer said.

“We go to the conferences and we talk to everybody and exchange business cards. We’ve talked to all the BEEs and they seemed keen to do something with us but then you never hear anything back,” he added.

Indian coal imports have traditionally been largely price-driven. Buyers have taken cheaper, low-calorific value Indonesian coal for the generating and cement sectors and either Chinese or South African for niche metallurgical sectors like sponge iron production, depending on which was cheaper.

This year, however, the sponge iron sector and some large cement producers have found their options curtailed. Chinese coal is not available at any price — demand and prices are too high domestically for exports to work to India, buyers said.

Security and performance guarantees are vital if Indian companies are to invest in South African coal or to sign term supply deals, and this has been hard to achieve also, an Indian source said.

“Our company reputation rests on our commitment to our customers. We always perform even if the market moves against us and we lose money. Therefore we need BEE suppliers to put up performance bonds and they must commit and perform, as much as we do, or our reputation is in jeopardy,” he said.

“We remain keen to invest, we’re always looking for the right opportunities. We’re still looking,” he added.

BEE coal producers also attending the conference said they were also keen to establish term supply deals with Indian buyers but they too required performance bonds and guarantees.

Source: Reuters

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