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Cathy Truter, Martin Hopkins, and Ntokozo Nzima
Don’t call it a comeback, but Exxaro is banking on coal resurgence
16 Jan 2025
Exxaro, in its pre-close message for the financial year ending 31 December 2024 (FYE24), expects a coal price correction to continue into the first half of 2025. "2024 has been characterised by coal price corrections, with pre-Russian-Ukraine war prices becoming the norm at levels below $110 per tonne," said Riaan Koppeschaar, finance director of Exxaro.
"The price decrease was exacerbated by ample supply on the seaborne market with Australia and Indonesia (largest exporters) recording strong production because of favourable weather conditions,” Koppeschaar continued.
“Geopolitics has had minimal influence on prices on a broader spectrum, signalling an end to price volatility due to geopolitical operational response."
Koppeschaar added that extreme weather patterns, together with anticipated tightness in spot supply availability, are expected to support seaborne thermal coal prices in the first half of 2025.
Exxaro also expects the average benchmark API4 Richards Bay Coal Terminal (RBCT) export price for FYE24 to average $105 per tonne, free on board (FOB), a 12.5% decline from the previous year.
The iron ore fines price for FYE24 is expected to average $107 per dry metric tonne, cost, and freight (CFR) China, an 11.6% decline from the previous year.
Total coal product (including buy-ins) is expected to decrease by 6%, and sales volumes are expected to decrease by 2% when compared to FY23.
Thermal coal slide
Thermal coal production is expected to be 6% lower compared to FY23, mainly impacted by lower Eskom demand in the Waterberg region and lower offtake at Leeuwpan in the Mpumalanga region.
This is partially offset by improved production at Belfast realising value through alternative ports. The increase in metallurgical coal production is demand driven.
That lower Eskom demand (-2%) will impact sales, expected to be down by 7% from FY23.
An expected decrease in the domestic market is as a result of more products being channelled to the export market, mainly from Belfast, as well as logistical constraints on the uptake of coal from Leeuwpan.
Transnet comeback
The forecasted 34% increase in export volumes is driven by the Transnet recovery and using the alternative distribution channels through Maputo.
Metallurgical sales are expected to increase by 3% compared to FY23, driven by increased demand by domestic end users.
The company is focused on improving efficiencies across the value chain and utilising insights from advanced analytics to alleviate the impact of external factors on its business.
Recovery plan
"Our coal business performance continues to be impacted by logistical challenges and low commodity prices," said Koppeschaar.
"However, through our Optimisation Programme, which focuses on improving efficiencies across the value chain, combined with the utilisation of insights from advanced analytics, we continue to alleviate the impact of external factors on our business and thus ensure that our business remains resilient and continues to deliver stakeholder value."
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