Coal export prices expected to increase to unseen levels within 3-5 years
In its market update released last week, the home grown company listed in Botswana Stock Exchange and Stock Exchange of Mauritius, noted that due to the recent depressed commodity market, the price of coal in the international market was negatively affected.
The company board chairman Alan Clegg has indicated that due to declining global coal supply the coal, the price of coal in major export countries is increasing. “Major export markets like South East Asia and China which are supplied mainly by Australia, have bounced back with the benchmark Australian export price coming within touching distance of USD70 per tonne and they are now making reduced losses of around +USD 15 to USD20 per tonne,” said Clegg. “Heavy rainfalls have hit Indonesian coal supplies also and with the Chinese Government shutting down mines at home on safety and environmental concerns these are all boosters for the price with some analysts predicting prices back at levels of USD90 per tonne by 2018,” said the board chairman.
Clegg noted the coal market is recovering and market analysis places South East Asia for significant growth with strong improvement by end of 2017 and into 2018. “The international market is still heading for a significant deficit within 3 to 5 years which will force prices upward to potentially unseen levels and highs,” he said. The mining engineer stated that the recovery is driven by the known global energy demand which, according to 2016 estimates requires an additional 40 million tonnes to 45 million tonnes of coal supply per annum. He added that closer to home, the Southern African power pool continues to hold a major net deficit of over 30GWe that is still growing as older power plants are closed down and need replacement.
“For Shumba what is happening is important as this now means that the merits of our projects have been strengthened and the company’s investment plan has been de-risked, further underlining the potential for significant returns on investment,” said Clegg.
According to Shumba Energy, the planned integrated coal mine and coal-fired energy projects, namely the 600 Mega Watt (MW) Mabesekwa Independent Power Plant (IPP) in Mabesekwa and the 300 MW Sechaba IPP in Palapye, now has the opportunity to become significant regional energy producers within 5 years. Sechaba coal is intended for export to international market while Mabesekwa coal is expected to be exported into regional market, according to the company.
The Company has added that although the time frames for the projects have extended due to the continued depressed market conditions until the recent reverse, the Sechaba mine & IPP Project continues with a very clear future.
The Company intends to start delivering 1.5 million tonne per annum (mtpa) of thermal coal to existing nearby power producers by end of 2017 and expand the mine to produce and supply an additional 1.5 mtpa and generate power for export into the region by 2018/19. The company also wants to further expand the mine to produce and supply an additional 2 Mtpa of high quality thermal coal for export via Southern Africa by 2022/23. Shumba Energy, the coal mining and power producing entity developing coal mines and power stations in Botswana is optimistic that the international market for coal is heading for recovery.