Thungela Resources, which is betting on expected dominance of coal as an energy resource, has successfully registered with the Dubai Multi Commodity Center Authority (DMCCA) in a major boost for the company’s coal exports from South Africa and Australia.
Although coal prices have been muted, especially in the European market, many producers have been shifting focus to the Asia-Pacific market and others. The Middle East market has been roiled by unrest following the outbreak of war between Israel and Hamas in Gaza.
Thungela registered with the DMCCA last month, the company confirmed yesterday, helping to push up its share price on the JSE by about 0.5% in afternoon trade.
The company’s stock, which is down 22% in the year to date comparative, will house its export marketing team under Thungela Marketing International at the Dubai office.
“The Dubai office will house the export marketing team, operating under Thungela Marketing International and this team will be responsible for overseeing a broad range of marketing functions, catering to both the South African and Australian assets,” Thungela said in a statement.
Expansion into Dubai underscores Thungela’s intention “to stay attuned to the needs of customers and the global commodities market” by deliberately positioning itself as a coal producer with a global footprint, it added.
July Ndlovu, the CEO of Thungela, who has been upbeat about the future prospects of coal despite current turbulence in prices on global markets, said registering the Dubai office and moving the export marketing team there constituted the company’s geographic diversification.
“This is a key milestone towards fulfilling one of our strategic objectives – to create future diversification options. TMI gives us direct access to seaborne markets and helps us to strengthen relationships with our customers,” Ndlovu said.
Thungela was gearing to become a key player in the international coal market despite global pressure from lobby groups against reliance on fossil commodities for energy.
Export saleable production relating to Thungela’s South African operations for the full year to December is expected to top 12.1 million tons (Mt), marginally higher than the mid-point of the guidance range of 11.5Mt to 12.5Mt issued in August 2023.
The removal of three underground sections in response to poor rail performance would result in a decrease of 7.6% compared with the prior year. Transnet has been problematic for South African coal miners, although Deon Smith, chief financial officer for Thungela, said in December that the company was encouraged by the signals by government over the last weeks.
“We are encouraged by the boldness the government is now looking at issues and the reforms around rail. We believe that thermal coal has a good place in the energy mix for a number of years to come,” he said during a presentation.
According to Smith, the European market has sagged due to inventory levels in the main coal supply hubs that has increased due to the low demand in Europe. The company had meanwhile resorted to trucking coal from its operations as a way of reducing the risk of train cancellations.
“Energy prices, including the price of coal, remain volatile and susceptible to ongoing geopolitical tensions. We continued to truck coal from our operations to nearby sidings, allowing for further rail loading options and reducing the risk of train cancellations.”
Thungela believes that a sustainable solution to the Transnet challenges afflicting the coal industry is dependent on the procurement of spares for the locomotives supplied by the Chinese locomotive supplier, CRRC.