Mining and energy company Exxaro said it remained bullish on coal this year thanks to favourable market dynamics, while the new US administration promises to disrupt global investment in the energy transition.
The group laid out its argument for a promising short-term coal outlook in its latest annual report published on Tuesday, forecasting tight supply in seaborne coal markets as Russian producers continue to face sanctions.
Added to this is Chinese expansionary policy, which is expected to support near term demand. While SA is not a major supplier of coal to China, an economic recovery in the world’s largest coal consumer would be beneficial for prices.
Investment in renewable energy, which asset manager Schroders has estimated to account for half of all infrastructure deals over the past 15 years, continues to shape long-term trends, clouding the outlook for coal.
However, US policies aimed at bolstering the country’s domestic coal production and cutting back on renewables could temporarily disrupt these trends.
Earlier this month, US President Donald Trump signed an executive order calling for coal to be designated a “critical mineral”, an argument that mineral and petroleum resources minister Gwede Mantashe also made last month, and for barriers on US coal mining to be lifted.
In the short term, Exxaro said it expected supply pressures and geopolitical factors to outweigh the trends driven by the broader energy transition.
“These constraints will likely sustain market demand, particularly in regions reliant on imported coal for energy security,” said Exxaro.
Escalating tension between the US and Asian importers may provide tailwinds for SA miners, as Asian buyers are expected to cut back on US crude purchases and turn towards suppliers from Russia, the Middle East and Africa.
Reuters reported that the pressure on Asian power producers caused by Trump’s tariffs and weakening global growth could also see coal, a relatively cheap source of thermal power, making up more of Asia’s energy generation mix this year, potentially pushing a recovery in Asian coal demand.
SA has become a big player in international coal markets in recent years. Amid Transnet’s improved freight rail performance, the Richards Bay Coal Terminal (RBCT) last year exported 52.08-million tonnes, its highest level in three years.
Asia’s share of SA’s total coal exports expanded from 37.1-million tonnes in 2023 to 43.99-million tonnes last year, meaning that 84.5% of SA coal exports went to Asia in 2024, with India and Pakistan being the two largest customers.
Despite Exxaro’s optimism, global coal imports fell to their lowest quarterly level in three years in the first quarter of this year, according to Trading Economics, with China, India, Japan and South Korea cutting coal imports more than 10% in the three months to end-March.
Amid fears that the US-China trade war will threaten global demand and drag down Chinese coal consumption in turn, the spot price of coal has given up 23.75% since the start of the year, with the weaker price environment putting pressure on SA coal producers.
Shares in Glencore are down more than 23% since the start of the year, while Sasol has given up 21.92%. Anglo American is down 8.93% and Exxaro has lost 3.75%.
Last year, a drop in export coal prices saw Exxaro report a 36% slump in annual headline earnings per share (HEPS).
Weaker oil prices and lower sales volumes also weighed on Sasol’s interim performance, and the petrochemical company posted a 31% decline in HEPS for the six months to end-December.
Glencore posted a net loss of nearly R30bn for the year to end-December as low prices and export logistics challenges in SA constrained its coal operations, with overall SA coal exports decreasing 5% year on year.
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