Multi-product coal distribution and price discovery for the domestic market via mathematical optimisation

Maryke Rademeyer (), Richard Minnitt () and Rosemary Falcon ()
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Maryke Rademeyer: The University of the Witwatersrand
Richard Minnitt: The University of the Witwatersrand
Rosemary Falcon: The University of the Witwatersrand

Mineral Economics, 2021, vol. 34, issue 1, No 10, 113-126

Abstract: Abstract This paper investigates the implications for coal supply security for the domestic South African market when faced with weaker export demand. A model is proposed of domestic coal trade via a trading hub which links coal production to consumer markets. An application of the theory for equilibrium price discovery at the mine-trader and trader-consumer interfaces is also described. It is found that the profit-maximising trader seeks to sell more volumes to domestic consumers of higher-grade coal to compensate for earnings lost due to lower export volumes. This results in lower prices on higher-grade product. Supply to domestic consumers of lower-grade coal appears to be unaffected by the weaker export market, with the price on lower-grade coal constant.

Keywords: Commodity economics; Coal marketing; Computational optimisation (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s13563-020-00232-5

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