Coal exports to bounce back after Covid-19 enforced hiatus, says Exxaro Resources

THE market for globally-traded thermal coal recovered during 2020 from the impact of the Covid-19 pandemic, and Exxaro Resources benefited from this although total South African exports are likely to be about 6% down on levels achieved in 2019.

That’s the message from the statistics published today in the pre-close message for Exxaro’s  financial year to end-December by finance director, Riaan Koppeschaar.

He forecast Exxaro’s coal exports would increase 27% to an estimated 11.6 million tons (Mt) (2019: 9.1Mt), commenting that the jump was driven by “the availability of additional export product from our own operations and buy-ins”.

Koppeschaar added: “We saw a good recovery in demand for coal from India and the rest of the world as lockdown restrictions were eased and industries resumed production. The  AP14 index returned to some stability before gaining momentum in November with highs of $70/t”.

He pointed out that Transnet Freight Rail (TFR) had railed 58.8Mt to the Richards Bay Coal Terminal (RBCT) from January to the end of October this year which was equivalent to an annualised tempo of 68Mt.

If achieved, that would represent a 5.7% drop from the 72.1Mt that the RBCT exported during 2019, but the track record of the terminal shows that the exporters often push through sharply increased tonnages during November and December which can change annualised estimates.

Exxaro’s South African coal sales have not fared as well with Koppeschaar forecasting a 1% dip in sales to Eskom compared with 2019 levels while domestic coal sales volumes are expected to drop by 9% “mainly due to lower demand from AMSA (ArcelorMittal South Africa) and the cement industries at Grootegeluk and ECC, partly offset by higher availability of product for the domestic market from Leeuwpan and Belfast”.

Following the expansion of railage capacity by TFR on the line from Lephalale to Ermelo the number of trains per week had increased from 4.8 in 2019 to 6.75 from January to October 2020. But Koppeschar noted that “… cable theft on the export line remains problematic and is negatively impacting our ability to ramp up export volumes from Grootegeluk”.

While the GG6 expansion project at Grootegeluk had been hit with an additional six month delay resulting from the COVID-19 lockdown period and problems with contractors the construction of the Grootegeluk rapid load out station had been completed and the terminal became operational at the end of September.

“The project close will be completed within the allocated budget by the end of 2020. The delay in project completion did not affect the TFR ramp-up schedule,” said Koppeschaar.

For 2021, thermal coal prices in Asia are “supportive” as the Indian market recovered and coal supply from Indonesia was cut back, but Koppeschaaar cautioned that “there remains a risk of the potential effect of second-round Covid-19 lockdowns and uncertainty around the stand-off between China and Australia”.

Turning to the Atlantic seaborne market, Koppeschar commented: “Thermal coal market supplier cutbacks, as a result of persistent low prices, have the potential to swing the market into balance”.