SAfrica: Diverting Export-Quality Coal to Eskom Plants Not to Happen Overnight

Text of report by South African newspaper Business Day website on 28 January

Power producer Eskom has asked local coal miners to find ways of providing it with more fuel but industry says there is no overnight solution.

Eskom’s request, which includes diverting export-quality coal to its plants, cannot be achieved overnight, says industry. Miners have export contracts in place, which they must fulfil, and transporting coal over long distances on SA’s [South Africa's] roads is also hampered when roads require repairing.

Eskom is also in talks with coal companies to get them to cut the ash content in coal they deliver.

Almost 90 per cent of SA’s power needs are generated through burning lower-quality coal, which cannot be exported because of its sulphur and ash content and its low heat-retention. The country’s power stations were designed to run on lower-quality coal.

Export quality coal, which has lower sulphur, less ash and better heat retention, is more expensive than the coal that is used locally to produce electricity. Eskom pays about R100 [rand] a ton, while coal is exported from Richards bay at about $100 a ton.

Anglo American, BHP Billiton and Xstrata are SA’s biggest exporters of coal.

Exxaro, which supplies Eskom with 40 per cent of its coal, has lost production after recent rains caused flooding at three of its mines.

Exxaro’s GM of investor relations, Trevor Arran, said unusually high rainfall at three of its mines which provided Eskom with coal meant that production had been lost. When the rain ceased, it would still be some time before the mines could run at full production as water in the pits would have to be pumped out, he said.

Exxaro would be running at full capacity if rain had not slowed production. The company had, however, committed to seeking ways of adding tonnage to its production for Eskom.

Eskom used about 120m tons of coal a year.

Bronwyn Wilkinson, head of communications at BHP Billiton SA, said the company was managing the effects of rain on coal production and it was close to fulfilling its contractual delivery requirements.

The diversified miner was also providing Eskom with coal that met the power utility’s specifications, she said.

Last week Public Enterprises Minister Alec Erwin said Eskom was “experiencing serious problems with coal quality and stocks”. He said the government would not hesitate to intervene in the market to secure strategic reserves for electricity generation.

Erwin said the government would discuss the issue with industry but “in the absence of a solution, we will have to invoke the emergency powers that we have”.

Wilkinson said the miner was – despite constraints – doing all it could to supply as much coal to Eskom as possible. None of its mines had been closed because of load shedding.

Anglo Coal spokesman Pranill Ramchander said the miner did not have a problem with providing Eskom with higher-grade coal but diverting export-quality coal to Eskom power stations could not happen overnight as the coal producer had export contracts in place.

In addition, Eskom would have to be specific about what type of coal it required, as coal’s make-up varied from mine to mine, he said.

Ramchander said recent rains had not affected coal mining operations. Eskom has said that wet coal exasperated its ability to produce electricity.

Anglo Coal had shut down five of its nine operations, losing three days of production, because of load shedding. Ramchander said the miner had shut down its export production mines at Eskom’s request.

The company had not quantified any loss but expected to be able to catch up lost production quickly, he said.

Arran said SA supplied about a quarter of the international trade in seaborne coal and lower exports were likely to push up prices. European coal prices rose their most in almost three weeks on Friday after miners shut collieries because of power outages.

China, the world’s biggest coal producer, has also ordered domestic shippers to halt exports next month and in March to ease shortages.& amp; lt; BR>

Prices are expected to move up as a result.

Originally published by Business Day website, Johannesburg, in English 28 Jan 08.

(c) 2008 BBC Monitoring Africa. Provided by ProQuest Information and Learning. All rights Reserved.