South African mining giant, Exxaro Resources, has recorded all-time highs in own coal production volumes, sales and exports during CY18, as it capitalized on favorable conditions in the domestic and international coal markets for the year ending Dec’18.
Exxaro’s coal output in CY18 stood at 47.8 MnT, up 5% Y-o-Y compared with 45.5 MnT in CY17, as per the data provided in its annual report. The company has recorded CARG of 15.5% from 41.4 MnT in CY14.
Net sales were recorded at 45.2 MnT in CY18, up 2% from 44.4 MnT in CY18. Out of the total quantity, 37.2 MnT coal was sold in the domestic market.
Exxaro’s coal exports were also at all time high recorded at 8 MnT in CY18. Although, exports had witness a slight growth from previous year’s total of 7.6 MnT, it had recorded a remarkable 50.9% CAGR from 5.3 MnT in CY14.
The company had reported a strong trading condition in the domestic market in CY18, where coal supplies to domestic power plant-Eskom increased in line with contractual commitments, while all other markets also remained stable.
South African coal index API-4 averaged USD 98, which had also pushed Exxaro’s average price to a 5-year high in CY18.
Consequently, stronger coal prices had helped the company to cushion the effect of bigger discounts on lower quality coals-which traditionally are directed to India.
Export Sales Destination:
Exxaro’s coal exports were largely driven towards Asia, which accounted for nearly 83% of the total volume.
Although, the individual sale quantity was not mentioned in the report, it is pertinent to note that share of coal taken by India had increased in CY18.
India had witnessed a strong demand for South African lower-grade coal up to 3Q18, when the market became oversupplied with coal from Indonesia and Australia after the ban on coal imports by China.
Demand from South Korea slowed in CY18 as South African coal failed to compete with Colombian material.
However, Exxaro had discovered new opportunities from Japan after it shipped a trial cargo to a power plant and also received a new order for 2019.
In Pakistan, coal demand was raised by the commissioning of new power plants. Exxaro made further inroads into the Pakistan market, by supplying both the power plant and cement industries.
Outlook for CY19:
Commenting on the future outlook for the first half period of CY19, Exxaro expects a muted coal supply response, specifically for higher energy coals, which would continue to support thermal coal prices. Adding to that, the company suspects Chinese and Indonesian coal policies may pose a downside/ volatility risk.
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