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South Africa's coal production is expected to soon drop drastically MP Consulting senior coal analyst Xavier Prevost predicts.  This is due to  low investment in new coal mining capacity and older mines reaching the end of their lives.

South Africa Hendrina Power Station

Hendrina Power Station, South Africa - Image via Eskom

The situation is unlikely to improve with the SARB having just raised interest rates for the first time since early 2016. Prevost was speaking to Mining Weekly Online at the Fossil Fuel Foundation’s conference on clean coal technologies, in Glenhove,on Tuesday.

The analyst sees South Africa was at “a point of transition”. “We don’t have the investments right now, [which means that] we cannot plan new projects or new mines – and that is the lifeline of the industry.” Investment is imperative to ensure the industry is able to continue producing sufficient volumes of coal to meet the demands of the local industry, as well as to continue exporting coal. “We are not doing that well – we are actually decreasing production. And with this comes increasing costs, increasing prices and, therefore, everything is [affected],” he said.

Prevost said “exports will never recover the allure they used to have” as a result of limited exported tonnage. “Export coal cannot grow until the present coal oversupply and Richards Bay Coal Terminal price decreases.”

In turn, this means that more low-ash coal will be used domestically, at higher prices, he said. Domestic prices are increasing continuously, with some better grades now fetching higher prices than similar grades in the seaborne market.

New coal mines were needed to supply coal to embattled State-owned power utility Eskom and future independent power producers Prevost said. He opined that the global drive to implement more renewable energy capacity would not have an adverse effect on coal. If it were to, he warned, it would increase the risk of energy poverty.

Prevost noted that renewables should only be implemented to a certain percentage of the mix that is “reasonable and logical”. Going beyond that, he warned, would become a problem economically.

He offered Germany as an example where it seemed to have implemented renewable energy measures only. “It’s not working for them as a country, and economically, it’s actually a big problem in terms of producing energy or electricity at competitive prices.”

Source: MiningWeekly

From The TradersCommunity Research Desk

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