Drummond ships first coal to UAE

Colombian coal producer Drummond has exported the first of a series of shipments for the 2,400MW Hassyan coal-fired power plant in the UAE.

A total of 164,200t of thermal coal was loaded on the Fortune vessel, which departed Puerto Drummond on 11 April. The ship will travel to Dubai via the Suez Canal, Drummond said.

The spot deal is Drummond's first to Dubai.

Hassyan's first 600MW unit was connected to the grid in November, according to contractor Harbin Electric, with steam blowing at the second 600MW unit, which was completed in early March. Each 600MW unit could consume around 1.6mn t/yr of NAR 6,000 kcal/kg-equivalent coal, assuming 43pc plant efficiency and an average load factor of 90pc, according to Argus calculations.

The UAE's thermal coal imports rose by 35pc on the year to 2.5mn t in 2020, according to customs data for key coal-exporting countries. South Africa accounted for the majority at 1.6mn t, although exports slowed significantly from August and were replaced by shipments from Australia, probably as the Chinese ban on Australian coal imports weighed on prices and made the origin more competitive into the Middle East (see chart).

Arbitrage opens up

Drummond's shipment this month will be the first Colombian coal export to the UAE since April 2018, and comes amid a wide Atlantic-Pacific arbitrage that has boosted the competitiveness of Colombian coal in the Middle East.

Argus assessed NAR 6,000 kcal/kg Colombian coal at $65.25/t fob Puerto Bolivar last week, $26.78/t lower than the weekly NAR 6,000 kcal/kg fob Newcastle assessment. This was out from a $20/t discount in December 2020.

Drummond's only other exports to the Middle East this year comprise 855,000t to Israel, up from 745,000t in the same period of last year.

Meanwhile, the 189,402t Dan May recently became the biggest ship to ever load at Puerto Drummond, and is now bound for Turkey.

Drummond's shipments to Turkey — the largest importer of Colombian coal — fell by 23pc on the year to 1.86mn t in the first quarter. Coal remains competitive on cost with gas in Turkey, but a busy second-quarter maintenance schedule and increased competition from Russia have recently dampened demand for Colombian coal.

Drummond expects to produce 31.5mn-33.0mn t in 2021, up from 29.3mn t in 2020, as global demand and prices recover and as production from a new mine ramps up.

By Diana Delgado and Jake Horslen

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