THERMAL COAL
The State of the Union: South Africa
February 2017
With volumes totalling over 70Mt, South Africa was the fifth-largest exporter of thermal coal globally in 2016. India purchases over 50% of South African coal exports, with key policy and pricing shifts leading to the decline of once-primary customers Turkey and China, and the emergence of new consumers such as Pakistan. Nearly 70% of South African export thermal coal is produced by three companies, with Glencore the lowest cost in 2016 at US$34/t FOB on average.

Domestic Dominance

  • South African thermal coal production has oscillated around the 170Mt mark for the past four years.

  • The majority of the thermal coal produced in South Africa is for domestic use, averaging around 59% of total production from 2011 to 2016.

  • The electricity sector is the leading consumer of coal in the country, accounting for over 65% of total coal consumption. This is followed by synthetic fuels, which accounts for around 21% of total production.

  • In 2016, the majority of South African export thermal coal was produced by Anglo American, Glencore and South32, accounting for nearly 70% of total sales on an equity basis.

 

 

The Key Markets

  • India has been the dominant buyer of South African thermal coal since 2009, purchasing an estimated 43Mt in 2016.

  • Pakistan has emerged as the second-largest importer of South African thermal coal by volume, importing over 5Mt in 2016, an increase of over 20% year on year.

  • Imports from Turkey, once the third-largest consumer of South African thermal coal, plummeted approximately 67% in 2016 to around 1.4Mt, with utilities now primarily targeting thermal coal from Colombia and Russia.

  • China was a key importer of South African thermal coal until restrictions on sulphur content of thermal coal imports were introduced in 2015. Chinese customers are anticipated to have imported less than 100kt of South African thermal coal in 2016, in comparison to 13.5Mt which was purchased in 2013.

 

 

Who’s Cheapest of the Pack?

  • Of the companies that produced more than 1Mt of thermal coal for export in 2016, the lowest average FOB cash costs belonged to Glencore and African Rainbow Minerals at an estimated US$34/t. African Rainbow Minerals is a joint venture partner with Glencore at three operations in Mpumalanga province, with an attributable export thermal coal production of around 3Mt. Glencore’s attributable export thermal coal production totalled approximately 14Mt for 2016.

  • The most expensive larger South African exporter in 2016 was SASOL Limited, with an estimated FOB cash cost of US$59/t on the back of high freight and mining costs.