South Africa's Exxaro Resources Ltd. can't fully exploit booming global coal prices because rail disruptions are limiting half of its potential exports of fuel.
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European coal prices went to a new record on Wednesday, as Russia squeezes natural gas shipments in Ukraine, boosting demand for the most polluting fossil fuel to prevent blackouts. Exxaro and other South African coal exporters can't fully benefit from this bonanza because the rail operations of state-owned Transnet SOC Ltd. have been hit by vandalism, sabotage and a shortage of locomotives.
The challenges mean Transnet has been unable to deliver coal from mines concentrated in Mpumalanga province to the continent's biggest export facility, Richards Bay Coal Terminal. Exxaro shipped just 2.5 million tons of coal to RBCT in the first half of this year, which is a decrease from 4.1 million tons a year ago and well below its annual capacity to export 12 million tons.
Sakkie Swanepoel, Exxaro's marketing manager, said in an interview that they were a bit cautious about the rest of the year. We have not seen an increase in performance. Transnet has taken unprecedented measures, including requesting approval for its security guards to be able to make arrests and conduct searches, but the changes haven't had a significant effect. Other miners in South Africa, including Thungela Resources Ltd., have lowered their export guidance.
Since 2017, RBCT has increased its capacity to 91 million tons a year, but rail bottlenecks have resulted in its annual exports dropping. Swanepoel estimates that 55 million to 60 million tons of fuel will be shipped from the facility in 2022, which could extend to a fifth year. It managed 58.7 million tons last year.
South African coal shipments to Europe have increased by more than 700% in the first half of the year, while flows to Asia have dropped.
Swanepoel said producers are using other ports when possible to get coal to export markets. Exxaro expects European demand for South African coal to increase in the second half of the year.
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