The extent of the Covid-19 lockdown demand destruction has become more evident as data comes in, with many of SA’s key export destinations registering falls in power demand of between 10% to 30% in April.
However, this has naturally been balanced by fewer railings and coal mines operating at far lower capacities. As the market stabilises pricewise, hindsight would suggest that the “rumour was sold, and now traders are buying back the fact”.
Global markets also seem to be discounting any further bad news with stock markets, and natural gas especially, enjoying a nice rally since the start of April. Both crude oil and Chinese domestic coal prices also firmed over the week.
Anglo American said its preferred method of exiting SA coal is via unbundling and listing its thermal coal assets on the JSE.
This would be interesting, but one wonders if there isn’t also the option of a management and employee funded buyout along the lines of the truly empowering Arnot OpCo deal that Exxaro facilitated.
Either way, coal ownership in SA continues to shuffle with the game board likely to be completely re-arranged in the next 3 - 5 years. As power demand returns slowly, Eskom is well-supplied with coal and chances of load-shedding remain slight.