South Africa's Thungela reduces coal output amid rail network failures

South Africa's Thungela Resources anticipates a 7.6% decline in coal production, projecting 12.1 million tonnes (mnt) in CY'23 as against 13.1 mnt in CY'22. The reduction is attributed to persistent freight rail issues with state-owned Transnet impacted by security-related problems and locomotive failures.

Transnet is expected to ferry only 47 mnt of coal to ports in CY'23, dropping below the 50.3 mnt-mark last year and reaching a 3-decade low level.

South Africa's thermal coal exports dropped 7% y-o-y to 53.68 mnt in January-November 2023 as against 57.43 mnt in the same period last year.

Thungela responded to continued rail underperformance by curtailing production at its three underground sections earlier this year. As of June, the company faced challenges in hauling 2.7 mnt of coal, almost a quarter of its export sales, stockpiled at mines due to transportation difficulties.

Despite these setbacks in South Africa, Thungela maintains a diversified approach with its 85% owned Ensham mine in Australia, acquired in CY'23. The Ensham mine is expected to exceed initial forecasts, reaching 2.9 mnt compared to the initial projection of 2.7 mnt.

This diversification aims to mitigate challenges posed by infrastructure issues affecting South African coal exports.