Exxaro’s first-half coal output expected to fall

Exxaro Resources’ total coal production and sales volume for the first half are expected to decrease by 14% and 12%, respectively, mainly due to reduced demand from Eskom at Grootegeluk.

Total expected production remained within 2% of the guidance provided previously, the company said in a statement on Tuesday. 

The average benchmark API4 Richards Bay Coal Terminal export price for the first half was expected to average $101/tonne free on board, compared with $112/tonne in the second half of 2023, the company said in a statement on Tuesday.

The iron ore fines price for the first half is expected to average $117 per dry metric ton, cost and freight (CFR) China, compared with $121 in the second half of last year.

Seaborne thermal coal prices started the year under pressure due to weak demand in Asia and Europe and lower natural gas prices. As the first half progressed, prices strengthened on the concern about the effect of tightening sanctions on Russia, geopolitical tensions in the Middle East, disruptions to US coal exports to India after the collapse of the Baltimore bridge, and disruptions to rail operations on SA’s main coal export line, resulting in higher European natural gas prices.

The volatility in steel demand remained the key driver for the iron ore market and pricing. Fading optimism and rising concern for China’s steel demand weighed on sentiment towards the end of the first half. The indication from the Chinese government regarding steel production curbs in 2024 had dampened market sentiment, the group said.

The SA market remained relatively stable, though macro factors affected domestic end users. The first quarter remained challenging regarding offtake from Eskom’s power stations in the Waterberg region, however, improvements were observed in the second quarter.

Price improvements in the second quarter improved the economics of exports through alternative ports, and also improved the demand for export products in the domestic market, Exxaro said.

Domestic thermal coal sales are expected to decrease by 54% based on the diversion of domestic sales into the export markets, mainly at the Mpumalanga mines. An increase of 23% is expected in export sales enabled by moving volumes through alternative export channels, mainly at Belfast. Total expected sales remain within 1% of the guidance provided previously.

The coal business’ capex was expected to decrease by 33%, mainly due to the timing of the equipment replacement strategy and the licence to operate projects at Grootegeluk and the Mpumalanga mines, Exxaro said.

mackenziej@arena.africa