EXXARO Resources, South Africa’s biggest coal producer that paid its highest interim dividend to June 2021 on firm iron ore prices, said yesterday that the coal export industry had recorded its worst performance due to constraints at Transnet Freight Rail (TFR).
Exxaro reported a 31 percent slump in export sales to 1.82 million tons due to TFR constraints as a result of poor locomotive availability, increased incidences of cable theft, as well as increased vandalism of rail infrastructure.
Chief executive Mxolisi Mgojos said all mines had railed lower volumes than in the first half of 2020.
“Locomotive unavailability, coal line shutdown disruptions, derailments, and other operational challenges combined with vandalism and sabotage of rail infrastructure and rampant cable theft have resulted in one of the worst export rail performances for the industry,” said Mgojo.
He said the domestic unsized market would continue to experience tremendous pressure on the back of TFR’s performance, as domestic mining operations continue to struggle with the evacuation of coal destined for export.
Exxaro said South African exporters had lost about 9 million tons of coal exports in the first half of 2021, after being constrained by a lack of export rail capacity from TFR. It said it was working with TFR and the Minerals Council South Africa to get to the bottom of the problems.
The average API4 RBCT export price of $98 (R1 446) per ton was 47 percent higher than $66 a ton in 2020, which helped offset the constraints.
Exxaro said tension between Australia and China had seen Australia placing large amounts of coal in traditional South African markets, in particular India and other Asian markets.
“This situation also provided an opportunity for South African coal to be exported to China, with China now the third biggest export destination for South African exporters, following India and Pakistan.
“Due to the second wave of the pandemic in India, demand is still subdued,” said the group.
The group’s coal production volumes excluding buy-ins fell by 12 percent except for Exxaro Central Coal (ECC).
The group said Grootegeluk’s metallurgical coal production was 26 percent lower, impacted by adverse weather conditions and a higher number of Covid-19 infections.
ECC recorded higher sales, as sales volumes returned to normal levels after the pandemic restrictions.
There were also 100 percent higher sales at Belfast as volumes intended for export were sold to local customers as a result of TFR constraints.
Despite the rail constraints, Exxaro declared a R20.77 a share interim dividend, up R14.34 a share from a year earlier thanks to a pass-on dividend from Northern Cape based Sishen Iron Ore Company (SIOC), in which it owns a 20.62 percent stake.
Exxaro, whose assets include the Grootegeluk mine in Limpopo reported a 180 percent jump in core equity-accounted income from SIOC to R6.3 billion during the half year under review on the back of the iron ore price rally.
SIOC declared an interim dividend in July 2021, amounting to R6.33bn.
Iron ore prices have soared amid rising demand from China.
Commenting on the recent civil unrest in parts of Gauteng and KwaZulu-Natal, Mgojo said it was a setback.
Exxaro Resources Limited shares closed 1.37 percent lower at R176.77 on the JSE yesterday.
BUSINESS REPORT