South African coal miner Exxaro Resources on Tuesday said it expected its production and sales to decline in the first half of the year due to lower domestic demand, while persistent rail logistic problems continued to hobble exports.
In an update, Exxaro said its coal production and sales volumes for the six months to June 30 were expected to decrease by 4% and 7%, respectively.
Export sales are seen 6% lower as state-owned freight rail operator Transnet continues to struggle to haul minerals to port due to locomotive shortages as well as cable theft and the vandalism of infrastructure.
Thermal coal prices have come off the record highs of 2022, when surging demand from Europe fired up coal miners' earnings after a ban was imposed on Russian coal following Moscow's invasion of Ukraine.
This is because European utilities have significant coal and gas stocks after last winter turned out milder than expected, while the availability of renewable energy increased. As a result, demand has cooled off and coal companies are expecting significant drops in profit.
"The bearish market sentiment in the first half is characterised by price declines, due to sufficient gas and coal stocks in Europe, exacerbated by warmer than usual winter temperatures, strong renewables performance, and materially lower gas prices," Exxaro said.
The minecompany said the coal export price averaged $127 per metric ton during the first half of 2023, less than half the average export price of $265 per metric ton recorded during the same period last year.
Reuters