Thungela profit drops on lower coal prices and rail woes

Thungela Resources, South Africa’s largest shipper of coal burned in power stations, suffered a 69% drop in first-half profit, hit by lower prices and transportation problems, it said on Monday.

The Johannesburg-based thermal coal producer spun off from Anglo American in 2021 added that it could be forced to “structurally resize the portfolio in response to rail constraints”.

Thungela said it has about 2.7 million metric tons of coal stockpiled at its mines due to state-owned rail operator Transnet SOC’s inability to move sufficient coal to ports.

“Depending on the trajectory of Transnet’s improvement or worsening thereof and the forward curve of prices, it could require us to further review the size and shape of our portfolio,” Thungela CEO July Ndlovu said on a conference call. He did not elaborate.

Freight rail capacity problems in South Africa are also forcing producers such as Exxaro Resources, Kumba Iron Ore to build stockpiles at their mines as they struggle to move the minerals to ports.

Ndlovu declined to provide production guidance for 2024. Output this year is forecast at between 11.5 million tons and 12.5 million tons.

“We need to see in the remainder of the year where this is landing us and that will allow us to decide on where our production is going to be in 2024,” Ndlovu said.