Miners juggle coal price and cost of transport
SA coal exporters face another challenging year as Transnet’s rail troubles force some businesses to consider persisting with more expensive transport options to get their product to international markets while commodity prices remain under pressure.
The industry expects to see a slight increase in Eskom’s coal usage, enough to at least recoup the drop in demand of about 5-million tonnes last year caused by record levels of power cuts implemented by the state-owned power utility, Seriti Resources CEO Mike Teke said. He was speaking at the McCloskey Southern African Coal Conference in Cape Town on Thursday.
Eskom’s coal demand could increase by between 5-million and 10-million tonnes in 2024, due in part to a number of generation units at Kusile power station returning to service after long-term outages and new units being commissioned.
Exports, however, will continue to face challenges as Transnet Freight Rail (TFR) struggles to return services on its export coal line to levels last seen in 2020.
Coal transported by rail to the Richards Bay Coal Terminal (RBCT) decreased sharply, from 70-million tonnes in 2020 to 50-million tonnes in 2022. Last year that number fell further, to about 48-million tonnes.
Teke said Seriti expects to see about 50-million to 55-million tonnes exported through RBCT this year, a view echoed by Bernard Dalton, head of marketing at coal exporter Thungela.
Dalton said TFR was running at a “55-million tonnes a year tempo” in December. “If they can run at that tempo for four or five weeks, why not for 12 months?”
The miners were slightly more optimistic than the management of RBCT, who last week set a 50-million tonne target for exports in 2024. TFR’s contractual volume rate is 60million tonnes a year.
RBCT previously handled more than 90% of coal exports from SA, but because of TFR’s deteriorating performance that has dropped to about 70%.
“While other coal exporters such as Exxaro have opted to use trucks to export coal via other ports, Thungela has made the decision not to do trucking,” Dalton said. At current prices, “even if you can reduce logistics costs, I just don’t know if it is viable to [export via road]”.
Still, if coal prices improved and rail problems persisted, Thungela might reconsider its position on trucking.
Kgabi Masia, chief coal operations officer at Exxaro, said a continued downward trend in prices would render the use of trucks to deliver its coal to ports unsustainable. “We cannot shy away from the fact that most mines are designed to [deliver coal via rail], but for the time being I don’t see us moving away from trucking coal while we struggle with Transnet.”
Despite price pressures and persistent rail problems, Masia said, Exxaro is not thinking about cutting back on production or retrenching staff.
Seriti retrenched hundreds of workers at its Klipspruit Colliery in Mpumalanga last year.
Teke said the company expects to see coal export prices of between $100 and $110 a tonne this year.
Masia and Dalton would not be drawn on prices this year, but Masia said if Exxaro could transport its coal to port by rail, $100/ tonne would still be a good price. Dalton said exporters using rail should be able to make a margin at $90 plus per tonne.
In 2022, SA coal exporters benefited from record prices for coal, which more than doubled after the invasion of Ukraine as European demand for SA’s highquality product surged. In 2023 the rapid gains were almost entirely reversed and exports to Europe dropped from 127-million to 102-million tonnes.