Exxaro Expects its First Half Coal Production to Decrease

Picture courtesy: (Exxaro) Exxaro announces that it expects its total coal production and sales volume for the first half of the year to decrease by 14% and 12%, respectively.

(The Post News)- One of South Africa’s top five coal-producing companies, Exxaro, announced on Tuesday that it expects its total coal production and sales volume for the first half of the year to decrease by 14% and 12%, respectively. Lower-than-usual demand from Eskom at Grootegeluk has been cited as the main reason.

“In terms of our capital allocation programme, we expect the capital expenditure for the first half of the year to be about 33% lower, owing to lower sustaining capital expenditure spent at the Grootegeluk complex,” the company stated.

About the company’s key commodities, the average benchmark AP14 Richards Bay Coal Terminal (RBCT) export price for the first half of the year is estimated to average $101 per ton, in comparison to $112 per ton in the same period last year.

Simultaneously, the price of Iron ore fines for the first six months of the year is expected to average $117 per dry metric tonne (DMT), which includes cost and shipping to China, compared to $121 in the same period the previous year.

Due to an upward revision of forecasted economic performance of the United States, Europe, United Kingdom and India, the world economic prospects were now looking up, stated Exxaro’s Financial Director Riaan Koppeschaar.

The iron ore market and pricing were significantly influenced by fluctuations in steel demand.

Concerns about China’s steel demand, coupled with reduced optimism, impacted market sentiment in the latter part of the first half.

The Chinese government’s announcement regarding steel production restrictions in 2024 further dampened sentiment.

Despite macroeconomic factors affecting domestic users, the South African market remained relatively stable.

The first quarter posed challenges related to Eskom’s power stations in the Waterberg region, but improvements were observed in the second quarter.

Price enhancements during the second quarter positively affected export economics through alternative ports. Additionally, demand for export products within the domestic market improved, according to Exxaro.

Domestic thermal coal sales are expected to decrease by 54% due to diverting sales to export markets, primarily from the Mpumalanga mines.

However, export sales are also anticipated to increase by 23% through alternative export channels, mainly in Belfast. Exxaro’s overall sales projections remain consistent with previous guidance, according to the company.

Exxaro is to release its audited interim results on August 15.