The Mineral Bureau’s chief eco-nomist: coal and hydrocarbons, Xavier Prevost, cautions that, while Euro-pean demand – South Africa’s main coal market – is currently surging, this may not be the case in some two years – the time it will take for the additional capacity at the RBCT to be commissioned from when construction starts.
South Africa last year exported a total of 76-million tons of coal to Europe and is expected to export a further 71-million tons this year.
However, the anticipated expansion – to 86-million tons a year capacity, from a current 76-million tons a year – is also curbing the country’s coal production, as several potential mines are awaiting official word on the RBCT project before being commissioned.
That is why South Africa is expected to export less coal this year than it did last year, explains Prevost.
“The country simply has no more production capacity at the moment,” he explains.
Meanwhile, RBCT CEO Nigel Stev- ens revealed last week that there is still no clarity when the expansion announcement will be made. The pro-ject is still awaiting funding approval from South African State-owned transport utility Transnet, whose rail subsidiary, Spoornet, is expected to spend some R700-million on rolling stock.
“While the expansion is being held up by bureaucratic red tape, the port needs the mines to utilise the additional capacity, and the mines need the port in order to be commissioned.
“However, when the expansion is finally announced, we may have a problem, as some of the mines could be behind on development and there will be a production shortage. We may see some companies moving to fill the gap through agreements and joint ventures,” Prevost argues.
Current European coal demand is pushing up prices – ARA prices were at their highest levels ever late last month and are still expected to rise – and South African coal prices, which echo European price movements, also hit record levels last week. Richards Bay FOB prices rose to $74/t on Tues-day.
“South African coal production mainly serves the European market. Coal exports to Europe increased by some 10% between 2001 and 2003, with some 84% of local production currently being shipped there,” Prevost comments.
“We also export to Africa and the US, but these amounts are minimal.” He explains that European reliance on South African coal stems from unstable and unreliable supply from Russia, which is seen as the only real competitor in coal supply.
However, this trend is expected to continue till the end of this year or perhaps until the middle of next year, whereafter prices could either stabilise or even decrease, on the back of an anticipated decline in European demand.
“There is an ever-increasing move-ment in Europe towards alternative forms of energy, so it is quite likely that we may lose our main market around about the time when additional cap-acity becomes available at the RBCT,” Prevost speculates.
He also confirms claims that South Africa may not have as much coal in reserve as previously thought, but said this should not be a matter of great concern.
“By the time our coal reserves are depleted in about 50 years, we will most likely have new technologies for other sources of energy,” Prevost stated.
“However, I’m not sure that we should turn so readily to nuclear energy. There is a definite trend in Eur- ope to move away from nuclear energy, so this may not be the best choice.”