Exxaro Resources has further revised down its coal export sales volumes forecast for the 2021 financial year, citing the poor rail performance operated by Transnet Freight Rail (TFR) that is inhibiting its ability to move coal to ports.
In an operational update for the six months to end-December, Exxaro said on Thursday that 4-million tonnes of export coal were at risk of being lost, up from the estimate of 3-million in August. These leave projected total coal export sales volumes for the full-year year at 7.5-million tonnes, down from the original estimate of 11.6-million tonnes.
“The alarmingly low levels of rail performance are due to poor locomotive availability, increased incidences of cable theft as well as increased vandalism of rail infrastructure,” Exxaro said in a statement.
“The coal industry intervened by appointing a security service provider to reduce cable theft and continue to engage on initiatives that can improve overall operational performance.”
The rail infrastructure bottlenecks imply that Exxaro may not be able to fully take advantage of historically high coal export prices, which have been driven in part by coal shortages in China.
Thungela Resources, which was spun off from Anglo American, said earlier in 2021 that it encountered similar inefficiencies at Transnet.
Exarro expects the coal export price index to average $115 per tonne in 2021, from $65 in 2020.
Earlier in 2021, China stopped importing coal from Australia following a diplomatic tussle between the countries, triggering a shortfall in coal supplies, which eventually led to a power crisis in China. The alternative sources of coal, which included SA, proved insufficient to alleviate the power crunch in China, which is the world’s largest consumer of commodities.
There was also a surge in gas prices, driven by in part by expectations of cold weather in the northern hemisphere, which supported a switch to coal.
Exxaro said the outlook for the international thermal coal market going into the first half of 2022 would be dependent on key weather patterns and whether China would achieve coal production targets during the northern hemisphere winter months.
The influence of high gas prices and expected cold weather in the northern hemisphere will be likely to drive stable demand for coal.
However, the outlook for the domestic market was subdued due to ample supplies of coal, which are not being exported as a result of poor rail performance.
“The domestic market demand for power station coal was depressed as Eskom remains well supplied with average stock of about 48 days, which is significantly higher than their minimum of 20 days. The poor rail performance continues to also impact all domestic coal markets, further exacerbating high stock levels at the mines,” Exxaro said.
The share price ended 0.11% higher at R153.29 on the JSE, valuing Exxaro at R53.9bn.
mahlangua@businesslive.co.za
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