Mine chamber denies coal shortage

South Africa does not have a coal supply or quality problem, despite Eskom saying it does, the Chamber of Mines said on Friday.

"There is no coal supply or quality crisis," the chamber's chief executive Bheki Sibiya said in a statement.

Eskom's chief commercial officer Dan Marokane told a coal conference in Cape Town on Wednesday that the security of coal supplies over the long term was a worry.

The power utility reportedly blamed the coal mining industry for supplying poor quality coal, which affected its electricity supply capacity, Sibiya said.

Eskom said the coal mining industry was diverting poorer quality coals, traditionally provided to Eskom, to the so-called lucrative export markets.

"These accusations and insinuations have prompted Eskom to seek the introduction of heavy handed mechanisms, such as price controls, quotas on exports and restrictions on the exports of the types of coal used by Eskom."

There had also been calls for the mineral resources department to declare coal a "strategic mineral" which would mean government could impose certain conditions on the production, storage and use of coal in South Africa. Mineral Resources Minister Susan Shabangu had not responded to these calls.

Sibiya said the average quality of coal received by Eskom did not appear to have changed significantly over the last decade.

"It also in general complies with the average parameters set out in the supply specifications in the contracts between the coal mining companies and Eskom."

Only two power stations were known to have been affected by coal quality problems, and there had since been agreements between the mining companies and Eskom to resolve the quality issues.

Sibiya warned that current Eskom problems should not be confused with the 2008 electricity crisis.

"The large load losses experienced by Eskom in 2008 were due to the failures of Eskom's own maintenance programmes as well as the failure of their coal stockpile policy."

Sibiya denied that South African coal miners were diverting coal suitable for Eskom to exports.

"... the export market does not take the quality of coals that are traditionally sold to Eskom.

"It is important to note that coal exports from South Africa have fallen from 71.4 million tons in 2005 to some 63 million ton in 2010, mostly due to the inefficiencies in the Coalink railway line."

South African coal exports to Europe had declined sharply and export volumes of export quality coals had shifted to the Far Eastern markets, including India.

The chamber was not aware of any future coal supply shortages threatening Eskom.

"Heavy-handed mechanisms to try and regulate the domestic coal mining industry and interference in a voluntary market-based system may well lead to significant distortions and unintended consequences for the country and may well prejudice security of primary energy supply," Sibiya warned.

Eskom's Marokane called for a national plan to ensure sufficient long-term supplies.

"Eskom is proposing that South Africa's coal resources are developed and exploited in the national interest.

"A key element would be a national primary energy coal development plan that would provide a framework for investment in the industry."

Eskom planned to discuss this with the government, through its shareholder, the department of public enterprises.