Exxaro: 1Q24 remained challenging due to low offtake from Eskom
The bearish trend on pricing continued from 2023 into 1Q24, mainly driven by sufficient supply of coal in major markets such as Europe, Japan, Korea, and Taiwan (JKT), with lower gas prices favouring gas power generation.
There was a late recovery in prices towards the end of March 2024, mainly driven by geopolitics and the Transnet Freight Rail (TFR) derailments in March and May 2024 which resulted in tight supply.
India’s economic growth resulted in active participation in the seaborne market, with some headwinds (strong renewables generation, revision of coal phase-out targets and cheaper gas prices) in Europe and JKT expected to affect short-term demand and price sensitivities.
The South African market remained relatively stable, though macro factors impacted numerous domestic end users. 1Q24 remained challenging regarding offtake from Eskom’s power stations in the Waterberg region, however improvements were observed in the second quarter. Price improvements in 2Q24 improved the economics of exports through alternative ports, and also improved the demand for export products in the domestic market.
Production
Thermal Coal production: The expected decrease of 14%, is mainly linked to the lower demand from Eskom at Grootegeluk, based on their latest internal plan.
Metallurgical coal production: Production aligned with market demand and logistics availability.
Total expected production remains within 2% of the guidance provided previously.
Eskom sales are expected to decrease by 12% based on lower Eskom demand linked to their internal maintenance and production plans.
Domestic thermal coal sales are expected to decrease by 54% based on the diversion of domestic sales into the export markets, mainly at the Mpumalanga mines.
An increase of 23% is expected in export sales enabled by moving volumes through alternative export channels, mainly at Belfast.
Total expected sales remain within 1% of the guidance provided previously.
The coal business’s capex is expected to decrease by 33%, mainly due to the timing of the equipment replacement strategy and the license to operate projects at Grootegeluk and the Mpumalanga mines.
