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

Author

Listed:
  • Maryke Rademeyer

    (The University of the Witwatersrand)

  • Richard Minnitt

    (The University of the Witwatersrand)

  • Rosemary Falcon

    (The University of the Witwatersrand)

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.

Suggested Citation

  • Maryke Rademeyer & Richard Minnitt & Rosemary Falcon, 2021. "Multi-product coal distribution and price discovery for the domestic market via mathematical optimisation," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 34(1), pages 113-126, April.
  • Handle: RePEc:spr:minecn:v:34:y:2021:i:1:d:10.1007_s13563-020-00232-5
    DOI: 10.1007/s13563-020-00232-5
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    References listed on IDEAS

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