Global Coal Demand Remains High but Prices Continue to Dip
South African coal, the country’s second-largest export earner by commodity, has had a rough start to the year. The Richards Bay Coal Terminal prices have dropped below $100 a tonne, mirroring levels seen a year ago. This downward pressure is likely to continue in the year ahead, as global demand peaked in 2023 and is expected to remain at current levels of about 8.77 billion tonnes through 2027, according to the International Energy Agency.
The Impact of China and India on Global Coal Demand
Despite the decline in coal prices, India’s coal market is expected to grow by 7.5% a year over the next five years, driven by the country’s growing demand for energy. In contrast, coal demand in Europe has declined, while remaining stable in the United States. China accounts for around 30% of global coal consumption, but this is likely to level off due to the country’s massive expansion in renewables to meet growing demand for electricity.
The Role of South Africa in the Global Coal Market
South Africa’s coal miners are accustomed to the swings of the commodity cycle and have started trimming costs in anticipation of a possible revenue slump. The country’s coal exports to India, its most important market, are expected to increase in the year ahead, driven by the growth in India’s coal market. However, the impact of Transnet’s rail bottleneck, which limited the country’s coal exports in 2022 and 2023, is still being felt.
Transnet’s Turnaround and the Future of Coal Exports
Transnet Freight Rail has shown signs of a turnaround, shipping 48 million tonnes of coal by rail in 2023, the lowest in about 30 years. However, coal producers have shipped another 22 million tonnes via road at a time when prices were high enough to justify the extra cost. With prices now around $100 a tonne, producers will find it harder to justify the high costs of using trucks to get their product to port.
The Future of Coal Consumption in China
Despite the boom in Chinese coal production, the World Bank expects Chinese coal demand to soften moderately in 2025 and 2026. This is driven by the country’s massive investment in renewable energy and its commitment to reduce its reliance on coal. As a result, South African coal miners may see their exports to China decline in the year ahead.
The Importance of Coal to the South African Economy
Coal is a major pillar of the South African economy, employing 97 000 workers and generating more than R100 billion in export revenues in the first 11 months of 2024. The industry is expected to continue to play a significant role in the country’s economy, driven by the growth in India’s coal market and the country’s efforts to increase its coal exports by rail.
The Richards Bay Coal Terminal prices have dropped below $100 a tonne, mirroring levels seen a year ago. This downward pressure is likely to continue in the year ahead, as global demand peaked in 2023 and is expected to remain at current levels of about 8.77 billion tonnes through 2027, according to the International Energy Agency.
Russia’s invasion of Ukraine in 2022 sent prices soaring to $350/t and higher for a period, but this was clearly unsustainable. The World Bank sees coal prices falling further in 2025 and 2026 but remaining above pre-pandemic levels of roughly $50/t.
China accounts for about 30% of global consumption, though this is likely to level off due to massive expansion in renewables to meet growing demand for electricity. China’s voracious demand for energy was mostly met by renewables and hydropower, leaving India as the driver of global coal demand.
In contrast, coal demand declined in Europe while remaining stable in the United States.
India is a more important market for SA producers, and there the picture is more favourable for coal – and for South Africa.
Mordor Intelligence estimates India’s coal market at 1.04 billion tonnes in 2025, rising to 1.5 billion tonnes by 2030 – notwithstanding the country’s Paris Climate Agreement commitment to install 40% of its electricity generation capacity from non-fossil fuels by 2030.
Despite this, the coal market is expected to grow by 7.5% a year over the next five years.
As Thungela Coal pointed out in its 2023 annual report, many developing nations, particularly in South Asia, still use coal as a primary fuel source.
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“Large importing nations, such as China and India, continue to invest in new coal-fired power stations to meet the energy needs required to sustain economic growth.”
Pressure on SA miners
Coal miners are accustomed to the swings of the commodity cycle and started trimming costs in anticipation of a possible revenue slump.
A December report by the Minerals Council SA shows coal mining input costs rising at just 2.7% in November 2024 compared with the same month in 2023. This was below other commodity producers such as gold (5.4%) and chrome (3.5%). The biggest contributors to mine inflation were electricity prices, which rose 12.2% over the year, along with finance, insurance and real estate (11.3%).
SA missed out on much of the coal boom of 2022 and 2023 because it could not ship sufficient product through Richards Bay Coal Terminal (RBCT) due to Transnet’s rail bottleneck, brought on by years of underinvestment in infrastructure and mismanagement.
Read/listen:
* Why did South Africa export the least coal in 30 years in 2022? [Jan 2023]
* Rail disruptions cut South African coal exports to 1992 level [Jan 2024]
Ironically, there are signs of a turnaround at Transnet Freight Rail. In 2023, it shipped just 48 million tonnes (Mt) of coal by rail, the lowest in about 30 years. Coal producers shipped another 22Mt via road at a time when prices were high enough to justify the extra cost.
With prices now around $100/t, producers will find it harder to justify the high costs of using trucks to get their product to port.
“There has been a marginal turnaround at Transnet Freight Rail, so I expect to [see] some improvement on the 2023 figures, but we won’t get near to 60Mt,” says Hugo Pienaar, chief economist at the Minerals Council SA.
“Indications are that the volumes railed to RBCT will be about 3Mt over what we saw in 2023.”
“The positive story is that we seem to have bottomed in 2023 and are now on the recovery path,” says Pienaar.
“In 2024 we had two pretty substantial rail derailments that set us back. The run rate in the final quarter of 2024 was fairly decent when there were no derailments. There’s been a lot of work by Transnet and coal companies to improve efficiencies on the coal line, so hopefully we won’t have a recurrence of these derailments in 2025.”
Chinese coal consumption likely to slow
Despite the boom in Chinese coal production, the World Bank expects Chinese coal demand to soften moderately in 2025 and 2026.
Coal is a major pillar of the SA economy, employing 97 000 workers and generating more than R100 billion in export revenues in the first 11 months of 2024.
“If we can increase that and remove some of the coal freighted by truck, this will be a win for the industry and for the country,” says Pienaar.
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