XMP Consulting senior coal analyst Xavier Prevost
Photo by: Creamer Media
JOHANNESBURG (miningweekly.com) – South African coal producers should focus on supplying local industries and State-owned power utility Eskom, given the changing and uncertain export environment, XMP Consulting senior coal analyst Xavier Prevost said on Wednesday.
Speaking at the inaugural Coal Industry Day hosted by Resources 4 Africa at the Johannesburg Country Club, he pointed out that both China and India – the latter of which buys about 46% of South Africa’s coal exports – plan to reduce their coal import volumes.
Further, prices for inland coal sales were “quite high” and increasing, Prevost noted, pointing out that the average price paid by Eskom in 2018 was R349/t, while the steel, chemical and cement industries bought coal at about R831/t, R513/t and R608/t, respectively.
He stated that the coal export market would never “recover the allure” it used to have, while domestic coal prices were “almost equivalent” to export prices, making the local market a good option for producers.
Prevost noted that coal was the most important commodity in South Africa, not only because of its importance in providing baseload energy capacity, but also because it generated the bulk of the country’s mining revenue.
In 2017/18, the coal industry generated sales of R145-billion, with export sales accounting for about R73-billion and domestics sales accounting for about R72-billion.
For comparison, the gold and platinum group metals (PGMs) sectors generated sales of R69-billion and R104-billion, respectively.
Further, unlike the gold and PGMs sectors, which were shedding jobs, the coal sector added jobs in 2018 and in the first three months of 2019.
The sector employed about 85 927 people at the start of 2018 and ended the year with 89 775 employees. By the end of March this year, the sector employed 92 933 people.
Prevost said that while there was “little left in this country” in terms of major miners, touching on divestments by Anglo American and South32, he stressed that midsized and midtier coal companies were growing “very fast” and that they could become the new majors in the future.
He noted that, despite perceptions by some stakeholders, “we have not reached peak coal,” pointing out that coal demand from China, India and South East Asia had increased over the past three years.
Moreover, it was his assertion that, “energy poverty can only be fixed by the use of coal.”