SHARES in Thungela Resources have surged 80% in six months, driven mostly by the US/Israel attack on Iran in late February, which is when the coal miner’s valuation received its decisive upward push.
Since then, the company’s share price has been volatile: it was the JSE’s best performer on Monday but shed 3% so far today. The fluctuating nature of newsflow from the Middle East is clearly creating trading opportunities as coal benefits from energy security worries.
Yet export coal prices haven’t improved on the same scale as oil or gas. “Last week, Richards Bay coal benchmark prices returned to levels they were at when the Iran conflict began,” said analysts at RMB Morgan Stanley. As a result, coal prices underperformed energy products in general.
The same has been observed in international markets. Adjusting for plant efficiency between gas and coal and the latter’s higher carbon costs, the API2 benchmark (coal imported to north-western Europe) is up 15 to 20% whereas gas is up 50 to 80%, said Swiss bank UBS.
While this supports the case for continued demand for cheaper coal, it is clear the Middle East hostilities are not as consequential for coal as Russia’s attack in Ukraine in 2022.
In South Africa, however, energy coal prices are subdued because not all exports are used in power production, says RMB.
“A large proportion of this coal is not used in power generation, but rather in steel production to make sponge iron,” said the bank. “South Africa’s coal has a uniquely high fixed carbon content that steelmakers find useful. About 56 million tons of sponge iron was produced last year, and 1.2 tons of coal is used per ton of sponge iron.
“We don’t know how much of the 31Mt of exports to India was for sponge iron production, but it seems plausible this may have been the majority,” the bank said.
Moses Madondo, CEO of Thungela, says energy markets “remain volatile” given the failure of the peace negotiations between the US and Iran over the weekend and the subsequent blockade of the Strait of Hormuz. He added that coal exports to the iron industry are “key”.
“We see commercial value in the sponge iron industry and continue to place our coal into key markets,” Madondo said via email.
Exports from Richards Bay Coal Terminal have “been up” over the last six weeks “and could further pick up with seasonal restocking ahead of the monsoon season in South Asia”, he said.
Thungela took asset impairments of R8.8bn for the 2025 financial year owing to a hefty decline in export coal prices for the period.
South African export coal prices were 20% lower ($89.53/t vs $105.30/t in 2024) while Ensham, Thungela’s Australian coal mine, reported a 17% fall in prices ($105.37/t vs $134.85/t previously). The weaker market was exacerbated by a strengthening of the rand and the Australian dollar against the US dollar during the period.
