Exxaro, SA’s biggest coal miner by production, has slightly increased its export guidance for the 2023 financial year, though overall shipments will still be about 1.6% lower than the previous year thanks to the poor state of the country’s rail network.
Shipments for 2023 were revised upwards by 6% to about 5.1-million tonnes compared with the previous guidance of 4.8-million tonnes. Last year the miner exported 5.2-million tonnes of coal.
In a pre-closed period statement on Wednesday ahead of its annual results, Exxaro said it expected total coal production for the year would be little changed, with combined local and export sales volumes down 2% to about 42.9-million tonnes compared with last year’s 43.1-million tonnes.
The company is an important supplier in the domestic market, selling most of its coal to Eskom.
Group marketing and logistics manager Sakkie Swanepoel said during an investor call on Wednesday the company had enjoyed a “period of strong demand from China and India”, though the year to date has been characterised by falling prices due to sufficient gas and coal stocks in Europe and Japan, South Korea, and Taiwan.
“The decrease was worsened by warmer than usual winter temperatures, robust performance in renewables and nuclear, and significantly lower gas prices,” he said.
API4, the benchmark price reference for SA coal exports, reached a high of about $280 a tonne in August 2022, but has since dropped to $100-$120 a tonne.
The drop in prices, said Swanepoel, has led to less coal being transported by road in SA, which is more expensive than by rail.
“[This has] placed a lot of pressure on coal that we sell to other exporters. Due to the lower prices most of those [trucked] exports have turned unprofitable,” he said.
For the first six months of the year, Exxaro delivered 2.45-million tonnes of coal to the Richards Bay Coal Terminal, down from 2.54-million tonnes a year earlier. The company expects to export 2.39-million tonnes during the second half, taking total shipments for the full year to about 4.8-million tonnes, or 8% less than in 2022.
Kgabi Masia, Exxaro’s MD for minerals, said performance on the Transnet Freight Rail’s (TFR’s) coal line has been poor having transported only about 40-million tonnes to RBCT in the 10 months to end-October.
“At most, we expect this to increase to about 47-million tonnes by the end of the year,” he said.
Last year RBCT recorded its worst annual performance since 1993, with total exports amounting to about 50-million tonnes.
Speaking at RBCT’s annual results presentation in January, CEO Alan Waller said the group had budgeted for exports increasing to 60-million tonnes in 2023.
Exxaro CEO Nombasa Tsengwa said Transnet’s dysfunction was the biggest challenge facing their business, though she added they have “noticed a sense of urgency creeping in” since the appointment of a new TFR board in July.
“For the first time there is [an] acceptance that Transnet has operated without a high performance culture. [Transnet is] agreeing they have outdated technology, and they acknowledge they have inherent inefficiencies,” Tsengwa said.
The new board, she added, has taken full ownership but “these challenges come a long way and cannot be solved overnight”.
Exxaro also announced plans to sell its ferroalloys business, which no longer fits its minerals business portfolio, to a black-owned business by the end of the second quarter next year.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.