STATISTICS on request

We compile client-specific reports to meet unique client coal information needs.

Current industry statistics, including production, sales, exports and pricing data, as well as the latest information on developments in the field are sourced from the records of XMP Consulting, coal industry specialists.

 

Featured Story Click title below for the full story

Jitters as US coal firms go bankrupt

As the global coal industry contracts - with Peabody Energy the latest to go under - experts say local producers won't feel the shock waves just yet.

ANALYSIS

When a giant of the global coal industry that has operated for more than a century shuts up shop, things look pretty bad.

The news last week that United States coal giant Peabody Energy had finally filed for bankruptcy was just the latest in a list of large coal firms that have gone under. Peabody joined the likes of Arch Coal and Alpha Natural Resources that have faced a similar fate in recent months.

The demise of big coal in the US has been linked to the rise of competing sources of energy – including electricity from renewable technologies and abundant, cheap gas.

Similar pressures face the local coal sector as South Africa looks to diversify its energy mix. But, local analysts say, these risks are not as immediate as other pressures such as minerals policy and Eskom’s changing coal-buying plans.

The director for mining at Cadiz Corporate Solutions, Peter Major, said the threats to coal-fired power – such as tougher regulations and competition posed by alternative sources of power – are “further down the road” for the local coal industry than they have been for US producers.

“The US coal industry has always had lots of competitors,” Major said, whether it be nuclear energy, hydropower, cheap natural gas or, more recently, the advent of increasingly competitive renewable energies such as wind and solar.

Energy conservation
The US has also, after decades of wasting power, realised the advantages of energy conservation and is way ahead of South Africa in respect of efficiency, said Major. It is also ahead of the game when it comes to implementing pollution controls.

There are few countries in the world where coal makes up 85% of electricity generation, as is the case in South Africa. It is likely that we will have to begin paying a carbon tax on this electricity source – albeit at a discount, given our status as a developing country, he added.

But rising costs and tougher competition are not the immediate problems facing the local industry, argued Major. Against the backdrop of a depressed global climate for commodities South Africa’s industries, particularly mining, have been hurt by burdensome legislation and declining labour relations and productivity levels.

“It’s not the coal price; it’s not demand [that poses the greatest risk to the coal industry]. It is legislation and ideology,” said Major.

Since 1994, more than 2 000 new pieces of minerals legislation and regulation have been passed, shackling and smothering the sector, he said. There is little acknowledgment from the government that the cumulative effect of these laws and regulations is hugely damaging, he added, especially because none has “eased” the process of doing business.

Labour relations is another problem, he said. Labour productivity in the coal sector, unlike other mining sectors, has not declined, although it has not risen by much either. In other parts of the world, labour productivity has risen at between 2.5% and 15% over the past decade.

In recent months large mining houses such as BHP Billiton, which has housed its South African mines in its South32 operation, have either unbundled their local mining assets – or, in the case of Anglo American, pulling out of coal entirely.

Commercial differences
Glencore, after protracted commercial differences with Eskom over the performance of its Optimum Coal mine, was quick to put it into business rescue and see it sold off.

Every commodity company has been affected by the market downturn, said Mzila Mthenjane, executive head for strategy and stakeholder engagement at diversified miner Exxaro. They are re-evaluating their portfolios “both in terms of commodity and geographic diversification in order to save costs, preserve cash and realign their capital allocation”. He added that domestic issues amplify these decisions.

The outlook is not entirely bleak. Xavier Prévost, senior coal analyst at XMP Consulting, sees a future for South Africa’s coal industry, despite depressing international headlines and the 65% slump in international coal prices between 2010 and 2016.

But much depends on certain issues being addressed.

South African coal exports felt the same price declines that other producing nations did but, said Prévost, the internal market generated more than R56-billion in 2015, 17% more than the revenues derived from exports. Coal consumption for Eskom electricity generation is still a mainstay for the local industry and could be its salvation.

Despite recent declines in industrial power demand, the advent of the new Medupi and Kusile power stations and the entrance of independent coal-fired power stations could see consumption growing to 150-million tonnes a year.

Hurdles to sustainability
But there are hurdles to ensuring the sustainability of the local market, said Prévost. Chief among these is the need for new investment in local coal mines, in a deeply depressed climate and with little expectation that demand from key international markets such as India and China will increase to prop up exports.

In particular, the large collieries that supply Eskom on a cost-plus basis require additional investment. These are chiefly operated by global mining houses and supply more than 80% of Eskom’s coal requirements. Without it they cannot sustain levels of supply or increase it.

Uncertainty caused by proposed changes to minerals legislation is perhaps the greatest hindrance to attracting much-needed investment in the local coal sector, Prévost said.

Recently, the mineral resources department proposed changes to the Mining Charter, including the requirement for firms to maintain a 26% empowerment shareholding in perpetuity.

Another challenge is the growing belief that Eskom should no longer invest in tied collieries, but instead procure its coal through contracts with a number of suppliers.

Eskom said late last year it was overhauling its coal-sourcing strategy. Public Enterprises Minister Lynne Brown endorsed this in her budget vote speech this week. Despite being the country’s main coal consumer, Eskom has been unable to keep coal costs below inflation, said Brown, and was reviewing its arrangements with cost-plus mines.

Red flags
Should Eskom do away with all its cost-plus mines, the number of coal mines is likely to decline and production levels will continue to dwindle, said Prévost. And because exports no longer generate the large revenues they once did, the industry will face severe challenges, he warned.

Some of these issues were highlighted in 2013 in the South African Coal Road Map, compiled by the government, Eskom and the industry. Among the red flags raised was the need for certainty about minerals policy and licensing processes, as well as a commitment to resolving the issues delaying the investment in new coal projects. But, said Prévost: “We are doing exactly the opposite.”

The minerals policy issues notwithstanding, large mines are needed to supply Eskom, but “there are no present or future projects to create them”, he said.

Mthenjane said the problems foreseen in the road map at the time, especially that of generating sufficient electricity to meet economic growth, have subsided.

The current low economic growth outlook has given some breathing room to the need for rapid mine development. Current electricity infrastructure should suffice during this period, he said. At the same time, new developments such as renewables, battery storage and distributed energy, combined with electricity efficiency drives, “may nullify the need for further large-scale electricity generation infrastructure”.

Eskom had not responded to questions in time for publication.

By Lynley Donnelly. Published on 29 April 2016 by Mail & Guardian Online.

This month's top international coal headlines

  • South African physical thermal deals spark reductions — Platts CTI
  • Coal Rally Won’t Last — Barrons

2016 archive

April 2016
  • High South African offers limit trade in India — Platts CTI
  • More Richards Bay FOB downside needed to attract demand: traders
    — Platts CTI
  • IHS Identifies Top Five Trends in 2016 That Will Shape the Global Maritime Industry for the Coming Decade — IHS
  • Jitters as US coal firms go bankrupt — Mail & Guardian
  • China and India could destabilize global coal market — Global Risk Insights
  • Australian coal prices plummet as Colombian cargoes head to Asia — Reuters
  • Behind the scenes BHP Billiton fears for thermal coal’s future — CoalWire
  • Eskom may lay claim to private coal mine assets — BD Live
  • South African supply tight — Platts CTI
  • Anglo’s Coal-Mine Sales Said Slowed by South African Utility — Bloomberg
  • India’s Energy Minister Wants to Cut Coal Imports to Nothing — Bloomberg
  • Eskom to breathe new life into ageing fleet — BD Live
  • South African FOB prices lose more than $1 on lower offers — Platts CTI
  • South African FOB prices sustain heavy losses — Platts CTI
  • High South African coal prices limit Indian buying — Platts CTI
  • World Coal Association says coal has a robust future regardless of climate change — Newcastle Herald
  • Has China’s coal use peaked? Here’s how to read the tea leaves — Reuters
  • Indian demand for S African coal seen, but cargoes limited — Platts CTI
  • South African FOB prices higher on concluded deal — Platts CTI
  • Murray Energy CEO on What's Smothering the Coal Industry — Fox Business
  • What Was The Primary Cause Of The Coal Crash? — Oilprice
  • Traders fear liquidity squeeze in South African coal market — Platts
  • Coal: Get out when you can — Financial Mail
  • Asia won’t abandon coal — World Coal
  • South African spot moves higher — Platts CTI
  • Richards Bay FOB spot gains further — Platts CTI
  • Anglo asset sales readying group for a takeover, says analyst — Miningmx
  • Well-bid Richards Bay FOB spot jumps to recover over $1 — Platts CTI
  • Interview with Frans Kesuma, President Director, PT Pamapersada Nusantara — Coaltrans Conferences
  • Physical Richards Bay thermal rebounds to claw back 45 cents — Platts CTI
  • Richards Bay May trades at $53/mt FOB — Platts CTI
  • Richards Bay physical thermal slumps $2 amid paper sell-off — Platts CTI
  • SA coal exports heading off a cliff? — Mineweb
  • Richards Bay spot thermal coal falls as offers increase — Platts CTI
  • S African coal deals in India limited amid price volatility — Platts CTI
  • Coal price hopes fade amid reality of slowing Asia demand: Russell — Reuters
  • How layoffs could signal better days for coal, or not — Star Tribune
  • RB softens, May still well bid — Platts CTI
  • S African Feb exports slip 19.7% on year to 8-month low of 4.82 million mt
    — Platts CTI
  • Richards Bay FOB thermal spot moves lower as demand remains dormant
    — Platts CTI
  • Traders fear liquidity squeeze in South African coal market — Platts CTI
  • Corporate Debt Defaults Explode To Catastrophic Levels Not Seen Since The Last Financial Crisis — Economic Collapse
March 2016
  • The coal conundrum — MIT Technology Review
  • Richards Bay FOB thermal coal spot steady, remains overpriced — Platts CTI
  • Richards Bay FOB spot gains almost $1 — Platts CTI
  • Richards Bay FOB spot steady — Platts CTI
  • Better outlook for South African coal — Platts CTI
  • The Sun Is Rising On Coal — Seeking Alpha
  • Has U.S. Nuclear Power's Death Spiral Begun? — IEEE Spectrum
  • The future of coal: the long comedown — RenewEconomy
  • South African FOB prices rally — Platts CTI
  • Indian power plant coal stocks hit new record high over 38Mt: CEA — Platts CTI
  • Rio’s Zululand Anthracite Colliery output unaffected despite sabotage, violence — Miningmx
  • Drought hits Indian coal plants and plans — Coalwire
  • The Death Of Thermal Coal And Its Transition To A Stranded Asset
    — Seeking Alpha
  • The return of 21st Century Coal — World Coal
  • Indian buyers cautious of volatile S African coal prices — Platts CTI
  • South African FOB spot reverses downtrend, posts $1 gains — Platts CTI
  • India’s Growing Impact On Maritime Trade — Seeking Alpha
  • Why investors are dumping coal — Politico
  • New Hope predicts flat thermal coal prices — SBS News
  • Indian buyers wait for S African thermal prices to fall further — Platts CTI
  • How did the world’s miners not see it coming? — Reuters
  • South Africa Coal Projects Collide With Water Scarcity, Financial Turmoil
    — Circle of Blue
  • South African FOB prices under pressure on keen selling interest — Platts CTI
  • Why Investment In Coal No Longer Makes Sense — Seeking Alpha
  • Coal baseload bidder expects IPP project evaluation to begin early April
    — Mining Weekly
  • Richards Bay FOB drops over $2 — Platts CTI
  • Richards Bay FOB spot steady — Platts CTI
  • Giants Topple In The Beleaguered Coal Industry — Oilprice
  • Richards Bay FOB slips another $1 — Platts CTI
  • Richards Bay FOB moves in opposite direction — Platts CTI
  • South African FOB prices edge up amid thin activity — Platts CTI
  • Last Gasp for Coal Mining Industry? — Fox Business
  • Molefe, Brown consign ‘coal supply cliff’ to history — Miningmx
  • Are You Kidding Me? Chinese Exports Plunge 25.4 Percent Compared To Last Year — The Economic Collapse
  • Coal in the energy mix of China — World Coal Association
  • High South African coal offers meet little Indian buying interest — Platts CTI
  • Richards Bay thermal spot prices surge on thin supply — Platts CTI
  • Indonesia may have to import coal for future power plants: Study
    — The Jakarta Post
  • Indonesia swims against the global green tide with its new coal commitments — Equal Times
  • Richards Bay FOB spot follows CIF ARA up — Platts CTI
  • S. African Exxaro’s 2015 coal production jumps 7% to 41.8 million mt
    — Platts CTI
  • S African Jan thermal coal exports slip 7.2% on-year to 6.16 million mt
    — Platts CTI
  • Glencore positive on coal turnaround — Mining Weekly
February 2016
  • Richards Bay FOB spot price stable — Platts CTI
  • Richards Bay FOB spot prices edge down — Platts CTI
  • Richards Bay FOB levels ‘far from reality’ — Platts CTI
  • South Africa prices edge up on confirmed trades — Platts CTI
  • FOB Richards Bay rises on higher offers — Platts CTI
  • Richards Bay drops on recent deals — Platts CTI
  • Richards Bay FOB floor pushed lower: traders — Platts CTI
  • High bids continue to boost Richards Bay FOB thermal spot — Platts CTI
  • Richards Bay FOB thermal spot rises despite lack of competitiveness
    — Platts CTI
  • Richards Bay finds alternative destinations — Platts CTI
  • South African coal demand muted — Platts CTI
  • Downtrend on FOB Richards Bay relents on prompt deal — Platts CTI
  • FOB Richards Bay registers another $1/t reduction — Platts CTI
  • Richards Bay FOB under pressure despite low stock — Platts CTI
  • Richards Bay spot moves lower on weak demand — Platts CTI
  • Richards Bay FOB thermal spot loses ground on low demand — Platts CTI
  • Indonesian thermal coal finds support in Australia, S Africa price rises
    — Platts CTI
  • South African coal prices rise — Platts CTI
  • Richards Bay FOB spot remains at 2-month high — Platts CTI
  • South African thermal Q2-2016 futures gain on strong bids — Platts CTI
  • Richards Bay FOB thermal spot edges higher amid prompt tightness
    — Platts CTI
  • South African 2015 thermal coal exports climb 1.3% on-year to 75.4 million mt — Platts CTI
January 2016
  • South African 2015 thermal coal exports climb 1.3% on-year to 75.4Mt
    — Platts CTI
  • Rallying South African FOB prices create arb potential for Colombia: traders
    — Platts CTI
  • Richards Bay FOB thermal spot edges higher amid prompt tightness
    — Platts CTI
  • FOB Richards Bay thermal surges on buying rebound — Platts CTI
  • Cost-plus mines under scrutiny as Eskom rolls out new coal procurement strategy — Mining Weekly
  • Bid, offer gap limits South African thermal coal trades in India — Platts CTI
  • FOB Richards Bay steady on limited trade — Platts CTI
  • Richards Bay FOB spot continues to trend down — Platts CTI
  • Prompt demand for FOB Richards Bay stems losses — Platts CTI
  • FOB Richards Bay dips to end bull-run as trading slows — Platts CTI
  • FOB Richards Bay Cal-17 also rises over $1 — Platts CTI
  • Richards Bay FOB spot continues to gain ground on short-covering — Platts CTI
  • South 32’s Jul-Dec thermal coal output falls 2% on-year to 17Mt — Platts CTI
  • More buying interest for South African coal — Platts CTI
  • FOB Richards Bay paper supported by spot bidding — Platts CTI
  • Richards Bay physical thermal surges as buying interest rebounds — Platts CTI
  • FOB Richards Bay thermal spot moves higher on re-emerging demand
    — Platts CTI
  • Richards Bay FOB gains as buyers return to market — Platts CTI
  • South Africa’s RBCT exports record 75.4Mt of coal in 2015 — Platts CTI
  • FOB Richards Bay spot edges higher — Platts CTI
  • Policy uncertainty, DMR leadership ‘challenges’, weak prices bode ill for mining sector in 2016 — Mining Weekly
  • FOB Richards Bay drops to over two-week low — Platts CTI
  • Tight supply for S African 5,500 NAR coal — Platts CTI
  • FOB Richards Bay spot price steadies — Platts CTI
  • FOB Richards Bay spot price flat on-day — Platts CTI
  • FOB Richards Bay sheds 15 cents on-day — Platts CTI
  • Pressure on FOB Richards Bay futures — Platts CTI
  • FOB Richards Bay spot price drops $2.50 following lack of strong bids
    — Platts CTI
  • Thermal coal markets start 2016 warily as demand outlook remains bleak
    — Reuters Africa
  • S African coal prices edge up in Indian market on limited supply — Platts CTI
  • FOB Richards Bay unchanged on-day — Platts CTI
  • After Paris, the future of Australian coal is downhill — The Conversation
  • Interest for S African coal increases — Platts CTI
  • FOB Richards Bay firms 50 cents on-day — Platts CTI
  • FOB Richards Bay spot price steady — Platts CTI
  • FOB Richards Bay jumps almost $2 amid spot trading spree — Platts CTI
  • S African Nov thermal coal exports up 14% on-year to 6.9Mt — Platts CTI

2015 archive

 

UPCOMING EVENTS

To be announced
 

Partners

 

Contact

Information

XMP Consulting

Pretoria, South Africa

t +27 (0) 12 333 6305

f +27 (0) 86 612 5688

m +27 (0) 82 494 3968

xavier@xmpconsulting.com xmpconsulting.com
 

About XMP Consulting

XMP Consulting is the parent company of AfriCoal Energy Review. All information provided by AfriCoal Energy Review is sourced through and backed by the XMP name and is held to the same high standard of technical expertise and professionalism.

The XMP coal team includes geologists, mining and coal processing engineers, logistics and marketing specialists, analysts and other support staff.

Read more >>>