Exxaro: Economic outlook for 2H24
Various headwinds to the anticipated global growth rates include financial conditions that will be less accommodative than expected and geopolitical uncertainties. Global inflation is expected to continue its downward path, barring any significant supply shocks. As a result, policy interest rates are predicted to start declining, affecting both global investment sentiment and economic activity.
South Africa’s real GDP contracted by 0.1% in 1Q24, after rising by 0.1% in 4Q23. An improvement in economic activity is expected in response to easing infrastructure constraints, however, the growth trajectory will be informed by uncertainty associated with South Africa’s new government of national unity and foreign exchange rate developments feeding through to inflation rate expectations which will determine the scope for policy interest rate relief.
COMMODITY MARKETS AND PRICE
Extreme weather patterns, together with the anticipated tightness in spot supply availability, are expected to support high Calorific Value (CV) seaborne thermal coal prices, offset by improving output in Australia and better gas and nuclear performances in key markets. Turning to low CV seaborne thermal coal, increasing renewables generation in China, along with healthy levels of inventory, will limit any significant price increases.
India’s strong economic growth and power demand is expected to continue driving seaborne demand, despite robust domestic production.
JKT’s demand is on the decrease mainly due to low electricity demand, due to a milder winter and strong renewables and nuclear generation. Gas prices will continue influencing coal prices in JKT and Europe, since it forms a significant part of the energy mix in those regions, resulting in switching between coal and gas power generation.
The domestic market will continue to remain sensitive to macro factors which severely affect the coal offtake for domestic end users, while export prices will remain the key driver for the demand of export products in the domestic market.
The seaborne iron ore price will be supported as overall global steel demand is sustained with continuous property sector stimulus measures implemented by the Chinese government.
