The coal price rally is expected to get derailed over the next two years amid expectations that China and India, the world’s two biggest consumers of the energy source were likely to address domestic issues that have facilitated the strength in prices.
Afriforesight chief energy economist, Charles Kieck said South Africa’s coal producers were sitting pretty, having enjoyed high coal prices last year, although the recent strengthening of the rand has spoiled the party a little.
“ We see coal prices coming down a bit, which is not good. The performance of South Africa’s coal producers also depends on what is going to happen to the rand on the other side of revenue. We see the rand weakening as some of the Cyril Ramaphosa hype fades, which is good for producers,” said Kieck.
The rand has strengthened on the outcome of ANC’s elective conference in late December, from R13.53 to the US dollar to below R12 to the US dollar as financial markets favour Ramaphosa as president of the ANC and South Africa.