Exxaro exports set to surge
• China effect from spat with Australia bumps up price, but volatility will fall
Exxaro Resources expects export coal volumes to increase 27% in the year to December, with weaker exchange rates likely to cushion softer prices. At a briefing, Exxaro, SA’s largest coal producer, said it had experienced a good recovery in demand for coal from India and the rest of the world.
Exxaro Resources expects export coal volumes to increase 27% in the year to December, with weaker exchange rates likely to cushion softer prices.
At a briefing ahead of entering a closed period as the financial year winds up, Exxaro, SA’s largest coal producer and largest supplier to Eskom, said it has experienced a good recovery in demand for coal from India and the rest of the world as lockdown restrictions eased and industries resumed production.
The company has also received inquiries for its product from China, which is not a traditional market for SA coal but has halted imports from Australia. It is this China effect that Exxaro’s head of coal operations, Nombasa Tsengwa, offers as one of the reasons that prices for SA export coal shot past $70 a tonne (R1,063) in November and $80 a tonne currently.
Although this provides a bump to exports in the short term, it is hoped the volatility deterring buyers and prices will stabilise in the coming months.
In respect of Exxaro’s key commodities for the financial year, which ends in December, the company expects the coal export price to average $61 a tonne as compared with $71 a tonne in the previous year, finance director Riaan Koppeschaar said. The price of iron ore fines — which Exxaro is exposed to through its stake in the Sishen Iron Ore — will average $100 a tonne as compared with $94 a tonne in 2019.
Capital expenditure for the coal business in 2020 is expected to have fallen 47% compared to 2019, mainly due to project delays linked to the coronavirus pandemic as well as to key projects reaching completion.
Exxaro expects to see production increasing across most of its operations in 2019 and coal sales are anticipated to be in line with previous market guidance, with a 5% increase in exports due to higher product availability, partly offset by lower Eskom sales from Mpumalanga operations.
Sakkie Swanepoel, Exxaro’s marketing manager, said there has also been very good progress with the sale of the group’s Leeuwpan and Exxaro Coal Central businesses, and that it should be able to announce a transaction very soon.
Going into 2021, Exxaro expects a continued global economic recovery and that demand and pricing in the domestic market will remain relatively stable.
Tsengwa, however, said the company is under no illusion that the path ahead will be anything but easy.
“We know it’s getting tougher out there in terms of markets. We’ve lost the European markets already and playing where there is growth in the Southeast Asia markets, we need to play with robust assets to compete [and at the same time ensure] we are not left with assets stranded and value on the ground.”
Exxaro said it has adopted stringent protocols around Covid-19, which will carry on into the new year as staff return to work. Koppeschaar said the group has sufficient liquidity to withstand an interruption to its operations and will remain a going concern for the foreseeable future.
WE NEED TO PLAY WITH ROBUST ASSETS TO COMPETE [AND ENSURE] WE ARE NOT LEFT WITH ASSETS STRANDED AND VALUE ON THE GROUND
Nombasa Tsengwa Exxaro head of coal operations