(Repeats earlier story for wider readership with no change to text. The opinions expressed here are those of the author, a columnist for Reuters.)
By Clyde Russell
CAPE TOWN, Feb 4 (Reuters) - There may be some irony in climate change being blamed for an increase in weather delays that resulted in South Africa’s coal exports dropping 4 percent last year, but in reality the rough seas at the country’s Richards Bay terminal are the least of the industry’s worries.
Shipments from Richards Bay declined to 73.5 million tonnes in 2018 from 76.5 million the prior year, well below the 91 million tonnes capacity of the terminal, which is the second-biggest in the world behind Newcastle Port in Australia.
The terminal lost 36 days of loading last year because of rough weather, down slightly from 38 days in 2017, with both these years being considerably higher than in preceding years.
But even if the terminal was fully available all 365 days of the year, it’s still unlikely that much more coal would have been shipped.
The blame for South Africa’s lower exports was placed on market conditions by the head of Richards Bay Coal Terminal (RBCT), Alan Waller, with high prices crimping demand in the main export destination of India.
However, RBCT chair Nosipho Siwisa-Damasane said the weather disruptions are also likely a challenge for future years, and terminals around the world were going to have to deal with the “new norm” of what was previously abnormal weather patterns.
While high prices were undoubtedly a contributing factor to the lower exports, it’s also likely that infrastructure constraints and an inability of many of South Africa’s coal miners to boost production were perhaps of greater importance.
The rail network has a theoretical capacity of delivering 81 million tonnes a year from South Africa’s inland mines to RBCT, meaning that even if it was working at full steam, there still wouldn’t be enough coal to use up RBCT’s export capacity.
Mandisa Mondi, the general manager of coal freight at state-owned rail operator Transnet told the IHS Markit Southern African Coal Conference in Cape Town last week that plans were in place to boost the rail capacity to match that of RBCT.
These include initial steps to improve technology and operational efficiencies to reduce bottlenecks, followed by later infrastructure improvements such as a new tunnel through a mountain between the inland coal fields and the coast.
Transnet said it could eventually boost the rail capacity available for exports by 25 million tonnes above current levels, but whether this happens depends on whether miners commit to producing and exporting more.
It’s here where the situation becomes less clear, with companies having been reluctant in recent years to invest in building new mines or even expanding existing operations.
Part of this was because of a long-running dispute over South Africa’s mining laws, although that appears to have been settled recently.
Still, South Africa’s coal miners would have to take a positive view of likely demand before committing capital to new projects.
The IHS Markit conference heard some rosy forecasts of demand for coal, mainly on a surge in new power plants being built in India.
However, these forecasts are likely to prove hopelessly optimistic, especially as renewable energies become cheaper and more reliable, and as more liquefied natural gas (LNG) becomes available from projects in Australia, the United States and Russia.
Just under half of South Africa’s coal went to India in 2018, a country with an official policy of reducing coal imports to zero over time.
Other major buyers include South Korea, which also plans to lower coal burning, and Pakistan, which has concerns over the foreign exchange cost of importing fuels.
While South African coal is viewed as a good quality product, and superior to supplies from top thermal coal exporter Indonesia, there are serious questions as to whether there will be sufficient demand in Asia to justify spending the hundreds of millions of dollars needed to boost mine supply and rail capacity.
This makes it likely that South Africa will continue to be a relatively steady supplier of around 75 million tonnes of coal a year to the seaborne market.
This could increase somewhat if Transnet can de-bottleneck and RBCT doesn’t lose more days to rough weather.
But for now, any ambitious plans to boost coal exports are exactly that, just plans.
Editing by Christian Schmollinger