Exxaro has reported that geopolitical tensions have reshaped global energy markets, surging the price of coal in the first half of 2026.
The diversified miner said this was pushed by Indonesia, the world’s largest exporter of thermal coal, to restrict output.
The country introduced export quotas in the first quarter of the year to curb production and support prices following a weaker 2025.
This effectively tightened seaborne supply and placed upward pressure on international coal prices.
This was followed by the Middle East war which triggered a surge in all prices, pushing up the cost of alternative fuels such as liquefied natural gas.
Shift back to coal
According to Exxaro, some energy consumers shifted back to coal as a more cost-effective option and this reinforced demand at a time when supply was already constrained.
“This heightened volatility resulted in disruption across global energy markets, with shifts in trade flows and fuel switching (LNG to thermal coal) in some markets.
These dynamics led to the API4 index reaching 31-month high levels above US$120 per tonne.
“The South African domestic market has not been insulated from global geopolitical and energy supply disruptions. Industrial end-users have faced margin compression due to elevated diesel costs, which have exerted upward pressure on operating expenses and profitability,” reads the pre-close statement.
These inflationary pressures prompted the South African Reserve Bank to raise the repo rate by 25 basis points in a pre-emptive move to contain risks.
Domestic coal demand resilient
Despite the challenging environment, domestic coal demand has remained relatively resilient, supported by stable offtake agreements and consistent customer demand. However, lower electricity demand relative to available supply from Eskom has affected coal burn at power stations, alongside operational factors such as outages and the utility’s continued use of cold reserve and merit order protocols.
Exxaro said benchmark export prices for the first half of the year are expected to average $105 per tonne, up from $92 per tonne in the same period last year, underscoring the strength of the recovery.
Exxaro noted that its operations continue to face headwinds including rail and logistics constraints, elevated diesel prices and ongoing commodity price volatility. However, the group has maintained resilience through cost discipline and optimisation initiatives across its value chain.
The company expects total coal production to increase by 10% in the first half, with sales volumes rising by 6%, while capital expenditure in its coal business is projected to jump significantly as it continues to invest in sustaining operations at key assets.
Read More: What the Iran war teaches us about SA’s power resilience thanks to our coal reserves
- Exxaro has reported that geopolitical tensions have reshaped global energy markets, surging the price of coal in the first half of 2026.
- The diversified miner said this was pushed by Indonesia, the world’s largest exporter of thermal coal, to restrict output.
- The country introduced export quotas in the first quarter of the year to curb production and support prices following a weaker 2025.
- This effectively tightened seaborne supply and placed upward pressure on international coal prices.
- This was followed by the Middle East war which triggered a surge in all prices, pushing up the cost of alternative fuels such as liquefied natural gas.
Exxaro has reported that geopolitical tensions have reshaped global energy markets, surging the price of coal in the first half of 2026.
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Despite the challenging environment, domestic coal demand has remained relatively resilient, supported by stable offtake agreements and consistent customer demand. However, lower electricity demand relative to available supply from Eskom has affected coal burn at power stations, alongside operational factors such as outages and the utility’s continued use of cold reserve and merit order protocols.
Exxaro said benchmark export prices for the first half of the year are expected to average $105 per tonne, up from $92 per tonne in the same period last year, underscoring the strength of the recovery.
Exxaro noted that its operations continue to face headwinds including rail and logistics constraints, elevated diesel prices and ongoing commodity price volatility. However, the group has maintained resilience through cost discipline and optimisation initiatives across its value chain.
Read More: What the Iran war teaches us about SA's power resilience thanks to our coal reserves
