South African coal producer Thungela's saleable export coal production fell by 9pc from a year earlier to 15mn t in 2021, hit by the under-performance of rail operator Transnet Freight Rail (TFR), according to the company's full-year financial results.
The firm's total export sales slumped by 16pc to 13.9mn t, which the firm said was due in part it opting in the third quarter to curtail lower margin production in response to the railing issues.
"After experiencing the negative impact of the second wave of Covid-19 on production and unit costs in the first quarter of 2021, the business regained momentum in the second half. We were, however, impacted by the rail constraints which became more pronounced as the year progressed [including two separate TFR maintenance shutdowns compared to the single shutdown in prior years]," said Thungela's chief financial officer Deon Smith.
"As a result, we decided late in the third quarter to curtail lower margin production, which had a concomitant impact on the full-year saleable production and export equity sales," Smith added.
The disconnect between saleable export production and achieved exports resulted in on-mine stocks to reach full capacity by September, the company said. As of 31 December 2021 the company had built up stocks worth R1.4bn rand ($94mn). This equates to around 900,000t of coal, based on Thungela's average realised sales price in 2021 of $103.82/t.
But Thungela, which demerged from Anglo American in June last year, reported full-year profits of R6.9bn in 2021 compared with a loss of R362mn in 2020.
The recovery was prompted by an increase in the company's realised export price from $48.47/t in 2020 to $103.82/t in 2021 and by-product optimisation in the second half of the year.
Thungela increased the sales percentage of coal with a calorific value (CV) greater than NAR 5,500 kcal/kg from 75pc in the first half of 2021 to 80pc in the second half of the year, to get maximum value from the coal it was able to rail, according to a results presentation published on 22 March.
The firm sold 5.8mn t of coal with a CV of NAR 5,500 kcal/kg or above in the second half, up from 4.9mn t in the first half. Sales of coal with a CV of NAR 5,500 kcal/kg or less fell from 1.7mn t in the first half to 1.5mn t in the second half.
Production outlook
Thungela expects that its export saleable production could drop further to 14mn-15mn t in 2022, given continuing issues relating to TFR's performance. But it expects that in 2023 and 2024 export production could exceed 16mn t as railings increase.
TFR has implemented a series of initiatives to boost railing capacity and security, including adding 40 locomotives to the coal export coal line, which Thungela's Smith described on an earnings call as "the single most important measure" the operator has taken to address the line's declining performance.
TFR railed 57.7mn t of coal to RBCT in 2021, equivalent to a weekly average of 1.1mn t, data seen by Argus show.
