A review of Southern Africa thermal coal markets
 

A review of Southern Africa thermal coal markets

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Xavier Prevost, Senior Coal Analyst, from XMP Consulting South Africa has presented at the Botswana Coal and Energy Conference. If you would like more information about the conference, please visit ...

Xavier Prevost, Senior Coal Analyst, from XMP Consulting South Africa has presented at the Botswana Coal and Energy Conference. If you would like more information about the conference, please visit the website: http://bit.ly/13MkVsy

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A review of Southern Africa thermal coal markets A review of Southern Africa thermal coal markets Presentation Transcript

  • A review of SouthernAfrica thermal coalmarkets
  • A review of Southern Africathermal coal markets1. World Overview2. South African Coal Reserves 20133. Central Basin and Limpopo Coalfields4. The “Big Five” and Junior Coal Mines5. SA Coal chain, from production to discards6. Coal Prices and their impact in the market7. Exports – where to now?8. Transnet – old and new rail lines9. Inland market Eskom, Sasol and other users• trends and prices
  • Energy is the source ofindustrialisation!Coal provides over 41% ofthe world’s energyrequirements.
  • Coal in electricity generation2011Source: World Coal Association 20110 10 20 30 40 50 60 70 80 90 100BotswanaMongoliaSouth AfricaPolandChinaAustraliaKazakhstanIndiaCzech RepublicMoroccoDenmarkZimbabweUSAKoreaGermanyUKTurkeyJapanNetherlandsVietnamRussiaCanadaFrance%Coal plays a vital role for energyproduction. Globally, coal accounts for41% of the world’s electricitygeneration. It is the key player forgenerating electricity on nearly everycontinent and is the foundation ofenergy production in both developedand developing countries. The graphto the right, reproduced from the IEAElectricity Information, 2011, showsthe countries that rely on coal toproduce electricity; many of thesecountries rely primarily on coal. Inaddition, new coal-fired power plantsare being constructed today; there isno doubt that coal will remain animportant part of the energy mix.
  • World coal growth 1970 – 2011
  • Global poor figures compared toEU population
  • Importance of coal in South Africa -2012 statisticsSouth Africa is the;– 7th largest producer of steam coal in the world - 250.3Mt– 4th largest consumer of steam coal - 178.7Mt– 5th largest exporter of coal - 73.4Mt– Has 5% of world’s hard coal reserves (6th largest reserves)Coal accounts for;– 1st highest foreign exchange earnings in the country– 2nd largest mining income earner commodity, beating gold– 93% of SA energy production– >90% of carbon reductants in the metallurgical industry– >40% of petrol and diesel requirements– >200 major chemicals for 1000s of carbon-based products
  • South Africa’s coal reserves inthe world context835%28%11%10%7%5%3% 0.7%World Hard Coal Proven Recoverable ReservesNorth AmericaChinaIndiaRussian FederationAustralia-OceaniaSouth AfricaEuropeColombia
  • Coal reserves in South AfricaCoal reserves by province1982 - 58.4 Bt (de Jager)2012 - 32.4 Bt est. (MB)• CENTRAL BASIN - 69.5% - Bituminous SteamWitbank, Highveld, Ermelo CoalfieldsSteam, petrochemical, export, industry• KWAZULU NATAL - 3.6% - Bituminous,Anthracite Coking, anthracite, leanBituminous.• LIMPOPO – 21.3% - Bituminous, Soft coking,PCI, Steam, export• V-SASOLBURG – 5.1% - Bituminous SteamCOALFIELDS OF SOUTH AFRICANINDIAN OCEANZIMBABWEBOTSWANALESOTHOSWAZILANDMOZAMBIQUENongomaVryheidLadysmithStandertonVolksrustUtrechtNewcastle271312141617Ermelo8MoltenoPotgietersrusSpringsPretoria WitbankBelfastVereenigingBloemfonteinThabazimbiRichards BayDurban510NORTHERNCAPEEASTERN CAPEFREE STATENORTH WEST PROVINCELIMPOPO PROVINCEMPUMALANGAKWA ZULU NATALGAUTENG1346119Welkom1819IndweCOALFIELD1) Tuli (Limpopo)2)3) Mopane(Western4) Tshipise(Central5) Venda-Pafuri(Eastern6) Springbok Flats7)8)9) Free State10)11) South Rand12)13)14)15)16)17)18) Somkele19) Molteno -IndweWaterbergSoutpansberg)Soutpansberg)Soutpansberg)WitbankKangwaneVereeniging - SasolburgHighveldErmeloKlip RiverUtrechtVryheidNongoma15
  • SA coal reserves - 201229%25%21%13%5%2.2%1.7%1.6% 0.8%0.4%0.3%0.01%HIGHVELD WITBANK WATERBERG *ERMELO VRG.-SASOLBURG SOUTH RANDUTRECHT KLIPRIVIER SOUTPANSBERGKANGWANE VRYHEID NONGOMACOALFIELDS OF SOUTH AFRICANINDIAN OCEANZIMBABWEBOTSWANALESOTHOSWAZILANDMOZAMBIQUENongomaVryheidLadysmithStandertonVolksrustUtrechtNewcastle271312141617Ermelo8MoltenoPotgietersrusSpringsPretoria WitbankBelfastVereenigingBloemfonteinThabazimbiRichards BayDurban510NORTHERNCAPEEASTERN CAPEFREE STATENORTH WEST PROVINCELIMPOPO PROVINCEMPUMALANGAKWA ZULU NATALGAUTENG1346119Welkom1819IndweCOALFIELD1) Tuli (Limpopo)2)3) Mopane(Western4) Tshipise(Central5) Venda-Pafuri(Eastern6) Springbok Flats7)8)9) Free State10)11) South Rand12)13)14)15)16)17)18) Somkele19) Molteno -IndweWaterbergSoutpansberg)Soutpansberg)Soutpansberg)WitbankKangwaneVereeniging - SasolburgHighveldErmeloKlip RiverUtrechtVryheidNongoma15
  • Coalfields of the LimpopoProvinceSpringbok FlatsWaterbergMopaneTuliPafuriTshipise
  • South Africa’s coal production inthe world context45.2%13.1%7.6%5.4%5.9%4.3%3.3%2.5%1.8%2%1.1%1%0.9% 0.8% 0.8% 0.7%5%China United StatesIndia AustraliaIndonesia Russian FederationSouth Africa GermanyPoland KazakhstanColombia TurkeyCanada UkraineGreece Czech RepublicOther
  • Coal production Run-of-Mineo Most of steam coal for export and domestic markets isproduced by 8 mega-mines, with more than 10Mtpa, 7in the Central Basin, our main producing area. Theremaining one in the Waterberg, where most of SA’scoal resources are. The later also produces a smallamount (20%) of coking and metallurgical coal.o KZN Coalfields have only four small mines, all producinganthracite mainly used as a reductant in themetallurgical industry. Most of the previously operatingmines, including some producers of hard coking coalhave closed down.o The V-Sasolburg Coalfield has two mines, with thelowest coal quality in the country. The rest of the coalresources in the south (Free State) contain even higherash.o The only mine producing hard coking coal is in theSoutpansberg Coalfield (Limpopo Province).o Molteno-Indwe Coalfield in the Eastern Cape has now amine. It has very young coal to be used as local thermalcoal or for exports.29%25%21%13%5%2.2%1.7%1.6%0.8%0.4%0.3%0.01%HIGHVELD WITBANK WATERBERG *ERMELO VRG.-SASOLBURG SOUTH RANDUTRECHT KLIPRIVIER SOUTPANSBERGKANGWANE VRYHEID NONGOMA
  • Coal production by companyAnglo, Exxaro, Sasol, BHP and Xstrata have77% of the coal market share in South Africa23.6%16.1%14.7%14.7%8.1%6.8%4.4%2.6%2.5%1.3%1.2%1.1% 1%0.7%0.60.3Anglo Exxaro Sasol BHP BillitonXstrata Juniors Optimum UmceboShanduka Sudor Kangra StuartTotal CoAL Kuyasa Ankero There is very little fragmentation in themature South African coal industry as bigplayers like Anglo, Exxaro, BHP Billiton,Sasol and Xstrata are in control of thelargest mines.o Exxaro, with large resources, has the onlytwo operating mines in Limpopo –Grootegeluk in the Waterberg andTshikondeni in the Soutpansberg ‘s PafuriSector.o The importance of the BEE mines is nowemerging as they produced more than30%. Exxaro ‘s Grootegeluk mine is thesecond largest producer, soon to almostduplicate production as mine expansion isimplemented.
  • The SA’s Coal Chain 2012 15Run-of-MineProduction311.2Mt“Washing”“Screening”Discards51.8Mt189Mt122.2MtStocks1MtSynfuels42.2MtElectricity120.8MtLocal Use 24MtExports73.4Mt50.4Mt 2.2Mt 40Mt1.4Mt 40Mt 80.8Mt
  • SA’s thermal coal inland marketprices16CoalspecificationsUnitLower Ash A -gradeLower Ash B -gradeHigher Ash C-gradeHigher Ash D-gradeHigher AshMinus D-gradeCalorificValueMJ/kg 27.5 - 28.5 26.5 - 27.5 25.5 - 26.5 < 24.5 < 22.5VolatileMatter% >27 >25 >24 >20 >18Ash content % 7 - 15 12 - 17 17 - 22 18 - 30 18 - 35InherentMoisture% <4 <4 <6 <7 <7TotalMoisture% <10 <10 <10 <10 <10Total Sulphur % <1 <1 <1 <1 <1Fixed Carbon % By difference By difference By difference By difference By differencePrice/tonFOTR R640 R550 - R640 R450 - R500 R350 - R450R9.50 -R11.50/GJ/t
  • SA’s Thermal coal market 20121766%23%9%2%POWER GENERATION SYNTHETIC FUELSINDUSTRIES METALLURGYUSER ktpaPOWER GENERATION 120 774SYNTHETIC FUELS 42 234INDUSTRIES 16 520METALLURGY 4 513TOTAL 184 041
  • SA’s exports 20121870%23%4% 2% 1%FAR EAST/ASIA EUROPEMIDDLE EAST AMERICASAFRICA & ISLANDSThe EU, once main marketfor SA exports, has fallento just above 20% of ourexports, while the Far Easthas grown to almost thesame size the EU marketwas in 2007. Future trendsfocus on China and India,while the EU market islosing its attractive forthermal coal exporters.
  • Platts ICR thermal coal marker –NW Europe19206010014018022019921994199619982000200220042006200820102012
  • Platts ICR thermal coal marker –Asian2004080120160200240Feb-98Feb-00Feb-02Feb-04Feb-06Feb-08Feb-10Feb-12
  • Transnet Coal System Proposal21
  • 303.6 MtDiscards51.8 MtElectricity120.8 MtExports64.0 MtSA’s future energy resources• Despite the requested increase in renewable energy sources,“the reality is that fossil fuels still provide the major share ofpower generation with coal alone accounting for 41% of theworld’s electricity, a situation that will not change in the nearterm”. International Energy Agency October 2011• With a potential delay of two years or more in the South Africannuclear programme, i.e. a loss of 3.6GW, what can fill thegap? Only Coal on top of the 19GW in the current programme. DCollins, Oct 2011• Renewables at present comprise approximately only 1% ofthe power generated in the country. Business Day October 201122
  • 303.6 MtDiscards51.8 MtElectricity120.8 MtExports64.0 Mt23Coal mining in South AfricaCoal mining provides jobs for the long-term.According to the DMR, coal mining provided more than 85 000 jobs in 2012, this figure willincrease, as more junior mines are opened in the future.Coal mining jobs fuel other jobs.For every coal mining job, many more additional are created elsewhere as coal is themainstay of the economy. In other words, coal mining keeps millions of people – includingcoal miners – on the job – supporting themselves and their families.Coal mining jobs are relatively well paid.If mines were eventually closed down, all those jobs will be lost, increasing unemploymentand poverty.Coal is abundant and affordable.Coal supplies 93% the electricity consumed by SA. Electricity from coal costs, in spite of therecent increases, are among the lowest in the world.
  • 303.6 MtDiscards51.8 MtElectricity120.8 MtExports64.0 Mt24The future• Most collieries optimising their coal production are now supplyingcoal to both inland and export markets.• The Waterberg Coalfield with very large resources, cannot be fullyexploited until the area’s infrastructure is suitable upgraded.• More production is needed now to supply coal to RBCT’s presentcapacity of 91Mtpa and future expansion to 105Mtpa, to the inlandmarket, Eskom Sasol and future independent power producers (IPPs).• Although there are other sources of energy in the country, they cannot compete with coal in price and reliability of supply.
  • THANK YOU!Xavier PrevostSenior Coal Analyst+27 (0) 12 333 6305+27 (0) 82 494 3968xavier@xmpconsulting.com