South Africa’s thermal coal exports dropped by 3% y-o-y to 60.24 mnt in CY’23 as against 62.21 mnt in the same period last year. However, exports rose by 45% m-o-m to 6.57 mnt in December 2023 as against 4.53 mnt in November 2023.
Railway disruptions impact exports
Exports fell as South African rail operator, Transnet, faced hurdles in coal exports amid a series of thefts that took place towards mid-October 2023 on the key line between Ermelo and Richards Bay. These incidents disrupted rail services, leaving a mere 28% capacity operational. The situation worsened with exacerbated disruptions caused by flooding in July 2023 at Richards Bay Transnet Port Terminal, further impacting the thermal coal market. However, Transnet’s situation has not shown signs of improvement. Despite South Africa’s stable coal production at 232 mnt y-o-y in calendar year 2023 (CY’23), transportation disruptions continued to adversely affect actual export figures.
Shift in South African coal exports from Europe to Asia
The transition of South African coal exports from Europe to Asia is evident, propelled by global price alignment and diminished demand in Europe. Notably, deliveries to India increased, whereas exports to Europe, specifically The Netherlands and Italy, experienced a decline in CY’23. Following Russia’s invasion of Ukraine in February 2022, there was a global reconfiguration in coal flows. South African deliveries to Europe surged after the continent imposed a ban on Russian deliveries.
However, price convergence between Russian coal and other global benchmarks has rekindled interest in South African coal in Asia, while reduced demand in Europe has opened up additional shipping capacities. Furthermore, South African exports to Asian nations gained momentum, driven by an increase in sponge iron production attributed to expansion in the industry.
South Africa prices
Throughout CY’23, South African coal prices exhibited substantial volatility, prompting Asian buyers to favour Russian coal for its cost-effectiveness. While prices reached unprecedented highs in CY’22 amid the Russia-Ukraine war, which led to heightened European demand for South African coal as a substitute for Russian coal, the scenario changed in CY’23. Prices dropped by 50% y-o-y to $105.48/t FOB in CY’23 as against $208.94/t FOB in CY’22.
Exports ( country-wise)
India was the largest buyer of South African coal at 26.17 mnt in CY’23, up by 33% y-o-y as against 19.60 mnt in CY’22.This rise was attributed to heightened demand from sponge iron producers in India, with a corresponding 16% increase in India’s sponge iron production to 48 mnt in CY’23 as against 41.43 mnt in CY’22. The steel output via the Direct Reduced Iron (DRI) route has surged by 16% in CY’23, leading to an increase in DRI consumption in the country. This contributed to the growing demand for South African coal in the region.
Shipments to South Korea dropped 23% y-o-y to 5.17 mnt in CY’23 as against 6.73 mnt in CY’22. Moreover, shipments to European countries i.e. the Netherlands and Italy dropped 56% and 37% to 3.06 mnt and 1.66 mnt respectively.
Port-wise exports
South African coal exports to Dhamra port reached 5.25 mnt, reflecting a substantial 47% y-o-y increase from 3.57 mnt in CY’22. Following closely were Vizag and Paradip at 4.70 mnt and 3.77 mnt, respectively. Mailiao port handled 2.78 mnt in CY’23, surged by 57% y-o-y as against 1.78 mnt in CY’22. Additionally, Gangavaram port handled 2.65 mnt of coal in CY’23.
South Africa coal exports up 45% in Dec’23
South African thermal coal exports increased by 45% m-o-m to 6.57 mnt in December 2023 as against 4.53 mnt in November 2023. India was the largest importer at 0.34 mnt (up by 32%) followed by Pakistan at 0.46 mnt (surge by twofold) and Japan at 0.45 mnt. Moreover, exports to China surged by more than twofolds to 0.35 mnt in December 2023 as against 0.15 mnt in November 2023.
Outlook
In CY’23, persistent issues such as cable theft, vandalism, and adverse weather contributed to a decrease in South African coal exports. To counter transport challenges arising from insufficient rail capacity, Transnet, South Africa’s state-owned rail and ports firm, aims to enhance coal export capacity by introducing 14 additional trains weekly from December to March 2024. This strategic move is anticipated to mitigate the decline in exports and facilitate smoother transportation in the coming months.
