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SA coal given months to end supply crisis Posted: Thu, 31 Jan 2008 [miningmx.com] -- A CRUCIAL task facing the South African coal industry is to increase coal stockpiles at Eskom’s power stations by 5.4 million tonnes over the next three months to ensure that the utility can meet peaking power demands during winter. That’s according to Anglo Coal SA GM, Ben Magara, who has been appointed to head up the Eskom Coal Working Group which was formed at the weekend to help tackle South Africa’s energy crisis. Interviewed at the McCloskey South African coal exports conference being held in Cape Town, Magara said: “We have the capacity to fix the problem. "Eskom has told us what coal they need supplied to which station. We are now looking at the optimal way to meet those requirements.” Magara declined to comment on how Eskom had got into such a tight supply situation on its stations, but that is one of the key talking points at the conference following last week’s attack on the South African coal companies by Minister of Public Enterprises Alec Erwin. Erwin alleged the South African companies were not supplying Eskom with enough coal and also that some of the coal being supplied was of poor quality. He threatened emergency measures to take coal from the export market and allocate it to Eskom’s needy power stations. The reaction from some delegates at the conference is that Erwin clearly does not understand the South African coal industry or how Eskom operates. There's a clear split between the export market and Eskom on coal quality requirements. Eskom has designed its power stations to burn coal that is lower in thermal quality and higher in ash content than the products which are sold on the export market. Samda (the South African Mining Development Association) director Sipho Dube told delegates that: “He (Erwin) clearly does not know that Eskom burns low quality coal.” Richards Bay Coal Terminal (RBCT) chairman Kuseni Dlamini said coal companies could not be blamed for exporting coal in preference to supplying Eskom because export volumes had dropped over the past two years from 69.5 million tonnes in 2005 to 66.5 million tonnes in 2006 and 66.1 million tonnes last year. Asked about Erwin’s allegations on supply and quality Magara replied: “At the four operations where Anglo Coal supplies Eskom power stations we have met all our contractual obligations in terms of coal volumes and quality.” But he pointed out that, at Eskom’s New Vaal power station - coal stockpiles had dropped from 3.5 million tonnes two years ago to only about enough to keep the station going for 10 days currently. Magara did not specify it but 3.5 million tonnes would be equivalent to about three months supply for the station. Eskom to blame So what has happened at Eskom? Sources at the conference attribute it to a number of factors. In part it is due to the pressure that Eskom has been under to run its power stations full-blast to meet the country’s rising demand. But that’s by no means the full picture. According to one coal industry source: “Eskom has deliberately run down its stockpiles. Eskom several years ago also set about diversifying its supply base to allocate more business to small, BEE coal companies. “Instead of contracting to take larger volumes from their traditional tied collieries they have agreed to take more coal from these other sources. In some cases those companies have not delivered what they said they would. “Eskom has also tried to rigidly enforce its contracts which are focused on paying the lowest possible price for the poor quality coal it takes. But Eskom can no longer do it because of the rise in export coal prices which has had a knock on effect on prices in the domestic market.” Click Here to subscribe to our daily newsletter
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