Exxaro eyes ‘interested’ India after coal-supply deal with Eskom bombs
EXXARO, embroiled in a dispute with Eskom over Arnot mine, is looking to India as the next critical player in its coal-supply business.
“Market diversification and market optimisation is the new way in Exxaro, whereas before we used to depend on one or two main big customers,” CEO-designate Mxolisi Mgojo told reporters on Thursday.
“We have to actively go and pursue new markets with new products.
“Hence we are saying we are optimising our product and optimising markets.”
In November last year, Eskom said it would not renew its 40-year contract with Exxaro for the supply of coal from Arnot mine to Arnot power station.
The power utility said it wanted to seek cheaper coal from other suppliers, such as Tegeta Exploration and Resources, which is owned by the Gupta family and Duduzane Zuma, President Jacob Zuma’s son.
Arnot mine is owned by Eskom and was mined by Exxaro.
According to Exxaro, there is still about 70 million tons of coal in the mine.
This week, Glencore reported a 10% decline in its annual coal production to 131.5 million tons due to low market demand and its sale of Optimum Coal.
Anglo American said last month that it was selling its coal assets.
However, Exxaro said it had not felt the pinch experienced by its global rivals.
Nombasa Tsengwa, Exxaro’s executive head of carbon operations, said: “We haven’t picked it [bad market conditions] up, and in terms of the local market, we are still running strong.
“In terms of our domestic [market] we are looking into new markets as well.”
Exxaro Coal Central’s portfolio was diversified and offered a good product mix, she said.
About 15 million tons of its coal production could enter the Indian market this year.
The company reported total coal production of 41.8 million tons in the year to end-December compared with 39.1 million tons the previous year.
“There is room [for more] and a lot of interest in terms of our qualities.
“They [the Indian market] are not sourcing coal as much from Indonesia as they used to because of the price impact and the tax in position by the government of India, so they prefer to take South African coal due to quality and the ash level,” Tsengwa said.
Mgojo said Exxaro had developed a relationship with its Pakistani customers over the years as they planned to build cement plants.
These customers were now looking to Exxaro “to be the reliable supplier”, providing them with the right product mix for their requirements.
“Instead of chasing 100 guys, rather chase key strategic customers over sales and as they grow their business, you are part of the strategy of growth in terms of source of supply,” Mgojo said.
Exxaro’s decision to diversify its portfolio shielded it from China’s low demand, whereas companies that based their strategies on that country were struggling, he said.
Tsengwa said Exxaro was not shying away from Africa.
It was supplying coal to Morocco and Egypt through a third party as demand for electricity generation in those countries was on the rise.