Shipping giant Grindrod has warned that the US’s and Israel’s conflict with Iran could reverse progress on the global energy transition as major energy consumers ditch volatile oil and gas supplies in favour of coal.
In its annual letter to shareholders, the logistics company warned that ongoing disruptions to global oil and gas supply would deal a blow to global growth while potentially fuelling a recovery in coal demand.
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With Iran effectively blocking the Strait of Hormuz, and consequently a fifth of global oil supply, the resultant supply shock has “extended to thermal coal markets, given coal’s ongoing role as an alternative to gas in power generation”, it said.
“While the Middle East is not a significant source of coal supply and the conflict has not directly affected coal production, a sustained period of elevated gas prices may support higher coal prices.
“This could lead to increased coal utilisation in certain markets, potentially slowing progress in the transition towards cleaner energy sources,” it said.
Major consumers, mostly in developed markets, have cut back on coal consumption markedly in recent years as they focus on reducing carbon emissions, leaning instead on nuclear and natural gas.
China, which accounts for more than half of global coal demand, according to the International Energy Agency, has invested significantly in renewables and natural gas while shifting its consumption to domestic sources and cutting imports.
Coal prices have been under pressure from shrinking demand, but since the outbreak of war in Iran they have regained some lost ground, buoying the share prices of Glencore and South African coal miners Thungela and Exxaro.
While a recovery in demand bodes poorly for the global energy transition, it is good news for South Africa, the world’s fourth-largest coal-exporting country, where the fossil fuel continues to play a big role, supplying 70% of the country’s energy needs.
While developed markets are “progressively moving away from Richards Bay coal”, emerging Asian and African markets offer a source of hope to local exporters, said Grindrod.
India, in particular, remains the largest importer of South Africa’s coal due to its surging power requirements — in part thanks to growing demand for data centres — and the “need for high-energy coal, which is suited to advanced power plants and is sourced predominantly from South Africa”.
“South African coal demand is also underpinned by new capacity for coal-powered generation in Africa and expanding cement sectors in Africa and the Middle East, though there is competition from Australia and regional producers such as Zimbabwe, Mozambique, Botswana and Tanzania,” said Grindrod.
More broadly, the war in Iran and the potential implications for global economic growth pose a threat to Grindrod’s outlook this year. Global economic growth, after remaining stable at 3.3% in 2024 and 3.2% in 2025, is expected to decline in 2026.
“Economic uncertainty increased sharply when the Middle East conflict erupted at the end of February,” said Grindrod.
“The immediate concern was increased inflation due to price increases in the oil and gas industry. Medium-term expectations pointed to higher logistics costs, driven by the use of alternative routes, fuel shortages and lower agricultural output.
“The effects of the increased energy costs are expected to have a detrimental impact globally.”
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