As the war in the Middle East continues to escalate, the crippling price of Brent crude could buoy profit for coal miners as big power users look to diversify their sources.
Local miners of the fossil fuel might expect some market tailwinds in the coming months if the war continues to disrupt fuel supplies, as coal demand rises and other countries look to tighten supply.
Some JSE-listed coal miners have enjoyed buying sprees so far in March as investors prepare for wider profit margins and better sales volumes.
Pure coal player Thungela Resources has seen its share price gain about 57% since the start of the war on Iran, adding a hefty R9bn to its market cap. The share price even rallied after it signalled weaker earnings in a trading statement on March 2.
The favourable coal price environment has added just more than R6bn to the market value of Exxaro, another major whose operations still focus primarily on coal.
Notably, though, more than half of SA’s overall coal output comes from unlisted companies, obscuring a comprehensive view of investor sentiment in the sector.
Brent crude has surged more than 50% since Iran was first hit on February 28, roiling energy markets as about a fifth of global oil supply exits the region through the Strait of Hormuz, which Iran has effectively blocked.
Coal, a readily available and now relatively cheap alternative source of fuel, has seen its price climb almost 20% so far in March, with the price on Thursday reaching about $140 a tonne, a level last seen consistently about 16 months ago.
This could be a boon for South Africa’s energy sector, in which coal continues to play a dominant role. South Africa is the fourth-largest coal-exporting country in the world, according to the department of mineral & petroleum resources.
Even though the country is looking to wind down some of its domestic coal-fired plants in the coming years, 70% of South Africa’s electricity demand is generated from coal.
Across the world, coal demand has remained resilient in recent years despite efforts to shift to cleaner sources of energy and ease demand for the fossil fuel.
The International Energy Agency (IEA) estimated that global coal production would reach a second consecutive record high of 9.2-billion tonnes in 2025, after a record 8.79-billion tonnes in 2024, even as many countries enacted more stringent environmental policies and poured funding into renewable energy infrastructure.
According to data group Trading Economics, Indonesia, the world’s largest exporter of coal which is responsible for about half of global supplies, has announced plans to prioritise domestic coal supplies in recent days, tightening exports in turn.
Reuters has reported that the surge in liquefied natural gas prices, which more than doubled in the week after the initial US strikes, has opened the window for gas-to-coal switching in some Asian markets, such as Japan and South Korea.
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