Sasol revises down its coal export guidance

Date: Oct 22, 2021

Sasol has revised down its coal export guidance for the 2022 financial year owing to a temporary production stoppage at one of its mines as well as bottlenecks in the South African rail network infrastructure.

The chemicals and energy group said yesterday that it was facing logistical issues in transporting export coal as a result of challenges being faced by Transnet Freight and Rail.

In its production update, Sasol said this had delayed its export coal from Secunda to Richards Bay, but it was working with Transnet to resolve the issue and return to normal operations.

Transnet has been facing severe challenges with its rail network infrastructure, from a cyber security attack to fires at its port terminals, disruptions that have cost the industry an estimated R30 billion($2,04bn) in lost foreign sales this year alone amid a surge in the demand for coal.

Other factors that have hampered the export of coal and other commodities included locomotive issues, rampant vandalism, cable theft and derailments.

As a result, Sasol said it was now targeting a full-year production of about 1 100 to 1 200 tons of coal, which is slightly lower than the previous guidance.

It said this was also due to the slower ramp-up of the Fulco integrated shift system and a temporary production stoppage of the Shondoni Collieries in Secunda, Mpumalanga, due to safety matters.

In early October, Sasol was faced with an operational safety incident at Shondoni and had to halt production until the matter was resolved.

Sasol production was also impacted by geological challenges, which affected the coal quality. The company is investigating potential solutions to improve the quality of the coal.

“We are conducting several tests to improve the quality of the coal through blends and different mix of coal, which will include external purchases in the short term,” it said.

“External coal purchases will also be implemented to ensure demand from Secunda operations is met.”

Sasol’s coal export sales were up 17% year-on-year for the first quarter of the 2022 financial year compared to last year, despite volumes falling 12%.

Sasol said it was hedging up to 80% of its coal export exposure to protect its significant margins benefit for the remainder of the year.

Sasol also posted a 44% rise in first-quarter revenue in its main chemicals business on higher chemical and crude oil prices, however, the sales by volume fell 8%.





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