Last year produced great excitement in the coal industry, as global coal prices rose to unprecedented levels and inland coal demand for power generation spiked, creating lots of false expectations, mainly among small-scale miners. Prices have since fallen 65% from the record highs of July 2008, bringing several coal mining ventures to failure.
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The Pacific market, previously neglected, is opening once more to South African coal, as countries in the region struggle to meet rising energy demand. Asia, particularly India, is also very eager to use more of South Africa’s steam coal. Until recently, EU coal exports have been the main driver for the South African coal industry, with the bulk of exports (63% in 2008) shipped there as European facilities prefer the consistent quality of South African low sulphur coal. The quality and competitiveness of South African steam coal should permit producers to serve the Atlantic and the Pacific Rim markets; however, some vital barriers need to be addressed before this happens. South Africa may be better equipped to handle higher export demand by year-end, when Richards Bay Coal Terminal’s (RBCT) 91 million t expansion project is expected to be complete. However, infrastructure has traditionally been the Achilles heel of the coal export industry and TRF, the rail service transporting coal from the mines to terminals, has not yet increased its capacity to accommodate the enlarged capacity at the RBCT. Exports are also expected to increase to 100 million tpa by 2020, provided most of the proposed new projects are executed. However, the rail capacity constraint forces a stalemate as new export producers’ mines are prevented from entering the export market until rail capacity is made available. South African inland sales to power generation are expected to increase to 200 million tpa by 2020. Finding coal reserves to replace the production of some large collieries due to close by around 2020, is imperative. The majority of the country’s reserves (72%) and mines (74) are in the Central Basin. The Limpopo’s Waterberg Coalfield, producing only 7.4% of the country’s coal, contains more than 40% (76 billion t) of South Africa’s coal resources. Lying 1050 km from the RBCT and 500 km from the industrial hub, this area lacks infrastructure and water resources, has only one mine and only 16% of the country’s reserves. It is also the focus of new exploration efforts and could be the future new coal mining centre, if its infrastructure and coal markets develop. The coal industry is poised for a major change, driven by the new Mining Act (MPRDA). The huge mines producing most of today’s coal are likely to be replaced by predominantly smaller mines in the future.Most coal is produced by only ten mega-mines, controlled by large multinational private companies, nine of them within the Central Basin. The MPRDA has resulted in more than 15,000 prospecting licenses applications, mainly in this area. The importance of small new mines is now emerging as a result of the scarcity of larger reserves. Between the last quarter of 2008 and mid-2009, some 11 new projects were launched, expected to add about 2.1 billion t to the present coal reserve base.