South African coal gains ground as Israel and Sri Lanka shift supply sources

• Israel imports 0.34 mnt of South African coal in March
  
  
• Sri Lanka replaces Russian coal entirely with South African supply
  
  

South African thermal coal is steadily gaining market share as buyers move away from Russian and Colombian supply amid ongoing geopolitical and logistical constraints.

Israel imported 0.34 mnt of thermal coal in March, entirely from South Africa. This represents a 112% increase y-o-y and m-o-m, highlighting a sharp acceleration in procurement activity.

Sri Lanka has also shifted decisively toward South African coal. Imports reached 0.17 mnt in March. Notably, Russian supply has dropped to zero, compared with 0.86 mnt in Q1 2025, indicating a complete change in sourcing strategy.

South African coal prices

Spot FOB Richards Bay 5,500 kcal/kg NAR coal was assessed at $92.05/t on 5 May, unchanged from 1 May, reflecting stable market fundamentals.

Offers were reported at $93-94/t FOB for June-loading Panamax cargoes, indicating limited upside in the near term. In the higher-grade segment, FOB Richards Bay 6,000 kcal/kg NAR coal was bid at $111/t and offered at $119/t for July-loading cargoes, pointing to a relatively wide bid-offer spread.

On the supply side, Indonesian export flows have weakened. Daily thermal coal shipments averaged 1 mnt over the past five days, down 8.8% w-o-w and significantly below the 2025 average of 1.31 mnt per day.

Underlying drivers

1. Geopolitical realignment of trade flows

Israel's surge in imports is closely linked to developments following the Iran conflict, with buyers actively building strategic inventories.

• Colombian coal remains unavailable due to export restrictions to Israel
  
  
• Russian supply is effectively excluded due to sanctions, payment challenges, and shipping constraints
  
  

As a result, South Africa has emerged as the primary replacement supplier.

Sri Lanka's shift follows a similar pattern. The complete disappearance of Russian coal from its import mix reflects both geopolitical constraints and logistical challenges.

Imports are projected to reach 1.3 mnt in H1 2026, up from 1.1 mnt in H1 2025, reinforcing the strength of demand for South African coal.

2. Freight economics favour South Africa

Freight dynamics are playing a decisive role in reshaping trade flows.

With Brent crude prices elevated at $110.66/bbl, global shipping costs have increased significantly. This has disproportionately impacted longer-haul suppliers such as Colombia and Russia.

South Africa's geographic proximity to key markets in the Middle East and South Asia is now translating into a clear competitive advantage, particularly for Panamax cargoes.

3. Indonesian supply tightness adds support

The recent decline in Indonesian exports suggests emerging supply constraints in the Pacific market.

• Daily exports down 8.8% w-o-w
  
  
• Production and logistics disruptions continue to affect output
  
  

At the same time, Indonesia's official HBA reference prices have strengthened.

The 4,100 kcal/kg GAR grade rose 5.3% to $55.66/t FOB in early May, indicating firmer fundamentals across lower-calorific value segments.

This tightening in Indonesian supply is indirectly supporting South African prices, particularly in the mid-CV segment.

Outlook

South African coal is benefiting from a combination of geopolitical shifts and favourable freight economics, positioning it as a key swing supplier in the current market environment.

However, structural constraints remain.

The rail corridor linking the Witbank coalfields to Richards Bay continues to limit export capacity. Any sustained increase in demand from Israel, Sri Lanka, or emerging buyers in East Africa could strain the system.

In pricing terms:

• The 5,500 kcal/kg NAR market remains stable, reflecting balanced fundamentals
  
  
• The 6,000 kcal/kg NAR market shows a wider bid-offer spread, indicating uncertainty over near-term direction.
  
  

The freight advantage over longer-haul suppliers is likely to persist as long as oil prices remain elevated, supporting South African competitiveness in key destination markets.