Price burns coal exports

Lower global commodity prices have hit South Africa's coal exports hard.

Mineral Resources Minister Ngoako Ramatlhodi said yesterday that lower prices meant revenue from coal was R23-billion less last year than in 2013.

"We are concerned about the extreme volatility in the coal price, which has a direct effect on the profitability of companies, as well as implications for employment," Ramathlodi said at IHS Energy's African Coal Exports Conference in Cape Town.

The price of coal, of which South Africa has about 100 years' worth of extractable reserves left, has halved over the past three years.

Coal giant Exxaro has seen its shares shed a quarter of their value in the last six months.

BHP Billiton is splitting off its SA coal assets into a separate company this year.

Glencore, another coal producer, announced last week that it could retrench staff and lower production at its local subsidiary, Optimum Coal Mines.

Despite South Africa having coal resources in excess of 66billion tons, it needs investment of more than R100-billion to extract it, according to Ramatlhodi.

But Bloomberg reported yesterday that Grindrod would push ahead with the expansion of a coal terminal near Richards Bay.

The shipping company will add 4.5million tons a year of capacity this year, growing to 20million tons in a second phase, Bongani Biyela, executive director of RBTGrindrod Terminals, said at the conference.

The total outlay is estimated at R2-billion, he said.

The terminal is finalising a partnership with Transnet "very soon", Biyela said.

"We are comfortable that, if a company can't produce coal, another will make it up," Divyesh Kalan, general manager of Transnet, said at the conference.

Additional reporting by Bloomberg