SA heading for disappointing thermal coal exports even as market incentivises production

SOUTH African thermal coal exports fell in the first four months of this year which saw the country miss out on record prices for the fuel.

This was the headline conclusion of a seminar held by Afriforesight this week, and reported by BusinessLive on Wednesday, which detailed exports of 20.6 million tons (Mt) of coal – a year-on-year decline of 1.9%. During the same period prices vaulted to $450/t by March.

At that run-rate, South Africa was likely to export 60Mt for this year, matching last year’s level but well below its capacity of 80Mt per year.

By April, the export price for Richards Bay coal had corrected to $300/t, but Afriforesight said another price improvement was likely later in the year as the Northern Hemisphere edged towards winter.

“It is likely that we will see another large spike in energy prices later this year during the northern hemisphere winter as demand increases in Europe,” said Afriforesight chief economist, Nathan Musson.

There was significant tightness in the thermal coal market due to the Ukraine conflict which has stunted coal exports from that country while oil and gas sanctions against aggressor Russia has seen European and Asian markets scramble for thermal coal supplies.

South Africa has been “a big winner in the scenario” owing to its shorter shipping lines to Europe compared to Australia and Indonesian coals.

However, the poor performance of the Transnet rail network, and at the Richards Bay Coal Terminal, meant that coal miners have not been able to make use of high coal prices as much as they would have wanted, said Vinesh Chetty, head of energy commodity analysis at Afriforesight.

Miningmx reported on June 7 that were Transnet able to return South African coal export deliveries to 80Mt – a tonnage last achieved in 2017 – it would net R15bn additional in the 2023 tax-take, according to a report by RMB Morgan Stanley on June 3. That’s assuming current spot prices for thermal coal which are running at $415/t in some parts of the world.