IN the next few days, African Source Markets will “soft launch” its online commodities trading platform, in line with its commitment to do so in the first quarter of this year.
Source Markets’ online commodities trading platform will be the first centralised online trading facility for African buyers and sellers of coal as well as some other energy and base minerals.
The trading site will feed price information into five to six new transparent coal indices for grades that are most in demand in the domestic market. These indices range from the RB1-equivalent at 6,000 kcal/kg to a 4,500 kcal/kg, which is used in Eskom power stations, as well as for sized coal used in the industrial boiler market. These indices are already being sent weekly to Source Markets members.
Until now, there have been no standardised coal indices for South African inland trading. The most commonly used index for South African coal is the RB1 standard, which African Source Markets CEO, Bevan Jones – formerly a banker with Rand Merchant Bank – and Sean Gilbertson devised at globalCOAL in London 20 years ago.
Jones said a recent improvement on original plans for the African Source Markets platform is that it will not only permit multilateral trading but also offer auctions and tendering to facilitate trading of commodities or grades that cannot be standardised.
Although Eskom is the biggest inland buyer of South African coal, Jones said it was unlikely it would dominate the trading platform.
Firstly, Eskom would probably continue to buy most of its coal on long-term contracts and use the spot market only for smaller purchases. Secondly, African Source Markets will act as a neutral supervisor of the trading platform to ensure there is no distortion or manipulation. As normal with commodity brokerages, prices will be matched through two-way credit lists and the counterparties to a transaction will only revealed to one another after a sale is concluded.
African Source Markets will also credit-rate all market members at level 1, 2 or 3, with level 3 sellers being those that Jones and his team have visited, whose product they have verified and who also meet environmental, social and governance (ESG) standards.
He said the main beneficiaries of the new online trading platform would be smaller buyers and sellers, including emerging and junior miners, who have operated at a disadvantage in the domestic market without access to export logistics.
Source Markets has partnered with logistics suppliers who will be able to quote for alternative delivery locations for trades executed on the platform. Often, smaller suppliers and traders make their margins through more efficient inland logistics.
Jones said the online platform would not necessarily be all good news for the bigger coal traders, who until now have dominated coal exports and handling infrastructure. They would probably continue to operate largely as before but the Source Markets platform could help them to widen both their supply and client bases
Apart from coal, the other commodities for which Source Markets will facilitate trading include copper, chrome, diesel, lithium, nickel, biomass and potentially even platinum and hydrogen. South African platinum producers have an interest in promoting the use of hydrogen fuel cells, which use platinum as a catalyst.
Late last year, the company acquired a new investor, Penrose Capital, an Eastern Cape-based fintech and property asset management firm founded and headed by Oyama Balfour.
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