XMP Consulting senior coal analyst Xavier Prevost expects South Africa’s coal production to soon “drop drastically” as a result of low investment in new coal mining capacity and older mines reaching the end of their lives.
Speaking to Mining Weekly on the sidelines of the Fossil Fuel Foundation’s conference on clean coal technologies, in Glenhove, last week, he said South Africa was at “a point of transition”.
“We don’t have the investments right now, [which means that] we cannot plan new projects or new mines – and that is the lifeline of the industry.”
Investment is imperative to ensure the industry is able to continue producing sufficient volumes of coal to meet the demand of the local industry, as well as to continue exporting coal.
“We are not doing that well – we are actually decreasing production. And, with this, comes increasing costs, increasing prices and, therefore, everything is [affected],” he said.
To mitigate these effects, Prevost told conference delegates, most collieries were now trying to optimise their coal production to supply coal to the domestic or export markets, depending on which was more profitable.
However, he pointed out that “exports will never recover the allure they used to have” as a result of limited exported tonnage.
“Export coal cannot grow until the present coal oversupply and the Richards Bay Coal Terminal price decrease.”
In turn, this means that more low-ash coal would be used domestically, at higher prices, he said.
Domestic prices are increasing continually, with some better grades now fetching higher prices than similar grades in the seaborne market.
Prevost noted that new coal mines were needed to supply coal to embattled State-owned power utility Eskom and future independent power producers.
Prevost also pointed out that the global drive to implement more renewable-energy capacity would, contrary to popular belief, not have an adverse effect on coal.
If it did, he warned, it would increase the risk of energy poverty.
While renewables could be used as part of an energy mix for a country, Prevost noted, this should only be implemented to a limited percentage of the mix that is “reasonable and logical”. Going beyond that, he warned, would become a problem economically.
As an example, he cited Germany, a country that seemed to have implemented renewable-energy measures only.
“It’s not working for them as a country, and, economically, it’s actually a big problem in terms of producing energy or electricity at competitive prices.”