Cape Town August 21 2022: Richard Bay Coal price for the month of September reaches USD 351.2 per ton on Friday 21st August 2022 as rail disruptions are curbing more than half of South African potential exports of the fuel amid increasing demand from Europe.
Coal prices gain more than USD 100 per ton or 39.8 percent in a month as Russia squeezes natural gas shipments to Europe following its invasion of Ukraine, boosting demand for the most polluting fossil fuel to help prevent blackouts. Exxaro and other South African coal exporters can’t fully benefit from that bonanza because the rail operations of state-owned Transnet SOC Ltd. have been hit by vandalism, sabotage and a shortage of locomotives.
South Africa’s coal sales to Europe rose eight-fold during the first half of 2022 compared with last year as demand for the fossil fuel surged ahead of a ban on Russian coal, Thungela Resources (TGAJ.J).
In April, the European Union announced a ban on coal imports from Russia as part of sanctions for its invasion of Ukraine. The ban came into effect on August 10.
Ahead of the ban, European countries, which previously imported 45% of their coal from Russia and have been switching away from expensive natural gas to coal, started to source the fossil fuel from other countries, including South Africa.
Those challenges mean Transnet has been struggling to deliver coal from mines concentrated in Mpumalanga province to the continent’s biggest export facility, Richards Bay Coal Terminal. In the first half of this year, Exxaro said it shipped just 2.5 million tons of coal to RBCT, down from 4.1 million tons a year earlier and well below its annual capacity to export 12 million tons.
“We’re a bit cautious about the rest of the year,” Sakkie Swanepoel, Exxaro’s marketing manager, said in an interview, referring to Transnet. “We have not seen an uptick in performance.”
Transnet has taken unprecedented measures, including seeking approval for its security guards to be able to make arrests and conduct searches, but the changes haven’t had a significant effect. Other miners in South Africa including Thungela Resources Ltd. have lowered their export guidance.
RBCT increased its capacity to 91 million tons a year, but rail bottlenecks have resulted in its annual exports dropping since 2017. That decline could extend to a fifth year, according to Swanepoel, who estimates that 55 million to 60 million tons of the fuel will be shipped from the facility in 2022. Last year, it managed 58.7 million tons.
Producers are using other ports when possible to get coal to export markets, Swanepoel said. Exxaro expects European demand for South African coal to increase in the second half of the year.
