Exxaro sees healthy coal demand

South Africa's largest coal producer, Exxaro, is set to thrive as a coal exporter amidst the tensions between Russia and Ukraine. Despite facing challenges with rail network bottlenecks that resulted in a loss of approximately R5 billion in export sales, the company remains optimistic about its future prospects. In an interview with CNBC Africa, Exxaro's CEO Designate, Dr Nombasa Tsengwa, shared insights on the company's performance and outlook. Dr Tsengwa highlighted the robust demand for thermal coal in global markets, driven by disruptions in the supply chain of major coal-producing countries. She emphasized the increasing preference for coal in the energy mix, particularly in Europe and China, where demand for high-quality coal is on the rise. The current tightness in the market has led to a significant increase in coal prices, with Exxaro benefitting from this favorable pricing environment. The CEO predicts that while prices may cool off from the current peak, they are likely to remain high throughout 2022. Despite the positive outlook, the company faces challenges due to inefficiencies in the country's rail and port infrastructure. Dr Tsengwa highlighted the importance of improving port efficiencies to counterbalance constraints in train capacities. She expressed concerns over the substantial financial losses incurred by Exxaro due to these inefficiencies, estimating a revenue loss of around R5 billion, translating to a significant impact on the company's EBITDA. However, she emphasized that the issue extends beyond Exxaro and is a systemic problem affecting various industries in South Africa. The interview also shed light on Exxaro's commitment to decarbonization, with a target to achieve complete decarbonization by 2050. The company has made significant progress in reducing scope one and two emissions by divesting from non-coal assets and investing in solar power generation. By 2025, Exxaro aims to reduce its emissions by 30 to 40 percent, with plans in place to address scope three emissions through engaging customers to adopt sustainable practices. The company's strategic approach to sustainability and operational efficiency underscores its commitment to aligning with global climate goals while capitalizing on the current favorable market conditions for coal exporters like Exxaro.