Domestic coal sales becoming more important than export market – Prevost

CAPE TOWN (miningweekly.com) – South Africa’s coal exports are dwindling to the point where it will become a minimal part of the market, says XMP Consulting senior coal analyst Xavier Prevost.

Speaking at IHS Markit’s 2017 South African Coal Export Conference, in Cape Town, last week, he said that, in 2016, South Africa produced about 253-million tons of coal, which was a small increase of 1.4-million tons from 2015.

South Africa exported about 69-million tons of coal last year. “It is very important to note that we generated R47-billion from coal exports at an average of R688/t. However,

South Africa’s local sales of coal, which equated to about 183-million tons created revenue of R60.8-billion in the past year,” he noted.

Prevost, hence, highlighted that South Africa created more revenue from its local coal market than from the export sector. He remarked that this was not the case in previous years, as the export market was the “real money maker” for local coal miners.

SOUTH AFRICAN COALFIELD STATUS
South Africa’s Mpumalanga coalfields have traditionally been the most important in South Africa; however, as these deplete, other coalfields have been touted as potential replacements, such as those located in the Waterberg region of Limpopo.

Prevost highlighted, however, that there were challenges to unlocking the coal in the Waterberg, including that the geology of the Waterberg was totally different from that found in the Mpumalanga Central coal basin.

He explained that coal from the Mpumalanga coalfields was significantly easier to mine, had better coal qualities and did not require the same expertise in terms of the washing process.

Prevost further noted that the Waterberg coalfields required specific types of washing plants and highly-skilled technicians to transform the coal into a usable product.

“These factors could seriously limit the value of the Waterberg,” he warned.

Meanwhile, Prevost revealed that XMP had recently conducted a study on behalf of power utility Eskom about the coal reserves that were still available for extraction in South Africa for power generation purposes. The study determined that – subject to the use of new technologies and correct mining methods – it possessed about 34-billion tons of coal.

COAL PRODUCTION AND EXPORT MARKETS BREAKDOWN
Anglo American is the single-largest producer of coal in South Africa, accounting for 20.4% of all local production. Small-scale miners contribute 21.8%, Exxaro 17.5%, Sasol 15.6%, South32 13.3% and Glencore 11.4% of all production.

Prevost predicted that Exxaro would become the largest single local coal producer over the next two years, as Anglo continued to scale back its coal portfolio.
He also pointed out that, in 2016, South Africa had exported 69% of its coal to the Far East, 11% to Europe, 10% to the rest of Africa, 10% to the Middle East and 2% to North America.

India is the largest buyer of South African coal, accounting for 55% of the export market, while Pakistan is the second-largest importer of South African coal at 7%.

Prevost commented that there were “substantial opportunities” for growth into the Pakistani market, as the country was seeking to expand its coal power stations in the coming years to meet growing energy demand.

However, he noted that South Africa was also facing increased competition from Colombia, which, on average, sold coal at “slightly cheaper prices” and at a similar quality to South Africa.