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Transnet says coal producers should plan for minimum 60 million tons this year

THE Russian invasion of Ukraine on February 24 has been a game changer for the industry as coal export prices have almost quadrupled and European countries have looked to reduce their reliance on Russian coal supplies. Picture: File photo.

THE Russian invasion of Ukraine on February 24 has been a game changer for the industry as coal export prices have almost quadrupled and European countries have looked to reduce their reliance on Russian coal supplies. Picture: File photo.

Published May 9, 2022

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COAL producers should plan for a minimum 60 million tons (Mt) of coal railed to the Richards Bay Coal Terminal (RBCT) this year after it fell to only 58.7 Mt in 2021 from 76.5 Mt in 2017, Transnet’s Ali Matola told the 17th McCloskey Southern African Coal Conference on Friday.

He said the problems in logistics at Transnet Freight Rail (TFR) were not unique to TFR, but they were working every day to improve service delivery.

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“I am responsible for the ore link and on that link we have seen a 10% improvement over the past six months, and as far as I am aware we had a 100 000 tons per week improvement compared with the prior six months on the coal line before the April floods,” he said.

Other delegates were not as optimistic as Matola and said they were planning pessimistically on only 49 Mt this year, given the ongoing spare parts shortage for TFR’s locomotives.

The Russian invasion of Ukraine on February 24 has been a game changer for the industry as coal export prices have almost quadrupled and European countries have looked to reduce their reliance on Russian coal supplies.

According to McCloskey, this will mean that some coal exports that previously went to India will now be diverted to Europe.

More than 85% of the coal exported in 2021, or 50.7 Mt, went to the Asian countries of India, Pakistan and China and only 2.3 Mt went to European countries.

One of the companies that have benefited from the changing market dynamics has been Botswana’s Minergy.

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“We are in the process of loading Botswana’s first shipment of seaborne export coal out of Walvis Bay in Namibia and have contracted for a second shipment as well,” Minergy’s CEO Morne du Plessis said.

Although Minergy’s coal mine is located near Gaborone, and the rail routes to either Mozambique’s Maputo harbour or Durban are therefore shorter than to Walvis Bay, dealing with three jurisdictions in the case of Maputo or the lack of capacity on the route to Durban, meant that Minergy had to resort to moving the coal by truck to Walvis Bay.

“It is currently worth our while to truck to Walvis Bay as long as the coal price remains above $200 (R3153) per ton, but the steep increase in the diesel price has cut into our margin,” he said.

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South African coal production dropped by 30 Mt last year and it could see another 30 Mt cut this year, according to XMP Consulting’s Xavier Prevost.

“South African coal has great potential, but what is missing is access to capital so that we can build more mines,” Prevost said.

This view was echoed by Vuslat Bayoglu, the managing director of coal producer Menar, who said red tape was delaying investment in new coal mines.

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“We have applied for permits for a new mine near Springs, but instead of the 90 days waiting time, we have waited more than four years,” Bayoglu said.

As part of its move away from coal-fired power stations, Eskom will be closing down nine ageing power plants and be left with only six plants by 2035, which will mean its demand for coal will drop from the 100 Mt per year level to something closer to 70 Mt per year over the next few years.

“The problem we have is that our plans say we need 1.636 billion tons of coal until 2050, but we have a shortfall of 650 Mt that has as yet not been contracted,” said Vuyisile Ncube, Eskom’s general manager for Fuel Sourcing.

BUSINESS REPORT ONLINE

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