EXXARO Resources generated profits and dividends in the six months leading up to the end of June, but that was thanks to its unmanaged investments in iron ore as its core coal business was hampered by the disastrous performance of Transnet Freight Rail (TFR) on the coal export line to Richard’s Bay.

Export sales of coal plunged 30% to 4.1 million tonnes (Mt) in the six months to end of June (six months to end of June 2020: 5.9 Mt). This is worse than what was predicted in March by Exxaro CEO Nombasa Tsengwa, who warned that some two million tonnes of coal exports were “at risk” for the whole of 2021 due to the poor performance of TFR.

Tsengwa told Miningmx today that the “at risk” figure for Exxaro’s coal export forecast for 2021 has been raised to three million tonnes.

Exxaro CEO Mxolisi Mgojo revealed that in total South African coal exporters lost some nine million tonnes of exports in the first half of 2021, which he described as “the one of the worst rail export performances for the industry “.

This means that TFR managed to deliver on average 1.5 Mt less coal per month in the first half of 2021 than expected.

This equates to 12.8% of the 70.2 Mt the Richards Bay Coal Terminal (RBCT) exported for all of 2020 and pokes fun at the hopelessly optimistic prediction made by RBCT management in January that the terminal would export 77 Mt this year due to “” the available capacity of TFR to transport coal “.

Mgojo attributed the loss of exports to a “lack of railway export capacity of TFR” caused by “… the unavailability of locomotives, coal line disruptions, derailments and other combined operational challenges. vandalism and sabotage of railway infrastructure and widespread theft of cables “.

Soaring coal prices

Exxaro was spared the full financial impact of these lower export volumes by soaring coal prices, with the API4 average benchmark (all publications index 4) jumping 47% to $ 98 / t ($ 66 / t). t) resulting in a 50% increase in the average realized export price of $ 78 / t ($ 52 / t).

The end result was that Exxaro’s net operating profit fell 25% to R3bn (R4.1bn). However, the group still recorded a 55% increase in its pre-tax profit to 9.3 billion rand (6 billion rand) thanks to a near-tripling in income from iron ore producer Kumba Iron Ore. (via Sishen Iron Ore Company) to 6.3 billion rand (2.2 billion rand).

Iron ore prices have doubled to $ 184 / t ($ 91.7 / t) and Mgojo expects tense market conditions to continue into the second half of 2021, commenting that “… increase the likelihood of further acceleration in steel production and demand for iron ore ”.

Regarding coal, Mgojo expects maritime and national thermal markets to remain “stable to strong” in the second half of 2021, as strong thermal demand from the northern hemisphere as well as the slow recovery in supply. China shipping and domestic shipping will support the price by ship.

Ironically, he adds that “… with poor domestic and export rail performance and recent civil unrest in South Africa, the API4 index has risen due to expectations of limited medium-term coal supply from South Africa. South Africa “.