Ukraine signed a deal to buy 1 million tons of coal from South Africa to maintain power after mining was disrupted by armed conflict. BHP Energy coal South Africa Middleberg operations.Photo supplied

Dineo Faku

THE DEAL in which South African companies will export 1 million tons of coal to Ukraine to help that country maintain power output amid an armed conflict with separatist rebels is a much-needed boost for local producers and poses no threat to supplies for Eskom.

Although the 1 million tons would not make or break the market, and was a temporary relief measure to mitigate the effects of the Ukraine conflict, the exports were expected to drive up demand and prices, which had fallen as low as $68 (R726) a ton, coal expert Xavier Prevost of XMP Consulting said yesterday.

“I don’t think Ukraine will be in conflict with Russia forever. I think that everyone in the coal industry is going to benefit from the deal, which will raise prices.

“It is good news even for the companies that do not have an export allocation at the Richards Bay coal terminal. They will benefit indirectly because someone else will take coal from them,” Prevost said.

Eskom said Ukraine exports would not affect its production because of the differing quality.

“From the information we have, Ukraine uses a very high calorific value coal with energy values of above 30 megajoules a kilogram,” an Eskom spokesperson said yesterday.

“Eskom has already secured and contracted the coal it requires for this year.”

Eskom has previously said that procuring sufficient coal of the right quality was a challenge. This is despite Eskom’s power stations being designed to use inferior quality coal.

It has previously complained that some mines delivered fuel that fell below its coal quality standards, resulting in increased particulate emissions, coal ash and wear on the plant.

Thando Mkatshana, the chief executive of the African Rainbow Minerals coal division, said yesterday that coal mines in eastern Ukraine could not operate because of the conflict, causing a shortage of fuel to run its coal-fired power stations.

“The exports to Ukraine are a positive development for the local industry. We have seen a price rise. We cannot hope for the war to continue for longer. We can hope to extend into territories like Ukraine.”

Ukraine Prime Minister Arseniy Yatsenyuk reportedly said that the first batch was being loaded as fighting in the Donbass region had halted production.

Half of Ukraine’s electricity is generated by natural gas or coal.

It was reported that the country planned to reduce its dependence on natural gas since Russia halted deliveries on June 16.

Prevost said that in addition to the exports to Ukraine, exports to Europe from Richards Bay had been growing since December last year. Europe was previously a big importer of local coal.

About 61 percent of exports from the coal terminal at Richards Bay are destined for southern African countries.