The war in Ukraine has forced European nations to move away from Russian coal, gas, and oil, raising the price of fossil fuels at a time when the region has been leveraging on these commodities to accelerate its green transition.
Russia, the third-largest exporter of coal, has been hit with broad sanctions by the West over its war in Ukraine, leading to shortages of the commodity while demand had already been rising due to the recovery of the global economy from the initial COVID-19 impact.
Countries in the EU as well as Japan are on the hunt for coal as baseload power and are increasingly looking to South Africa and Botswana among other producers.
Morupule Coal Mine, owned by government’s mining agency, Minerals Development Company Botswana, recently signed two contracts to ship P54 million of coal to Asia and P190 million to Europe per annum.
Last month, the Palapye-based colliery exported 4,000 tonnes of coal through the Maputo port in Mozambique, sending two consecutive trains hauling 40 wagons through Zimbabwe.
“We expect to ship 162,000 tonnes per annum through the same route,” Morupule Coal general manager, Edwin Elias told Mmegi in Palapye on Thursday.
“We have received a lot of enquiries and are currently in talks with Poland to export between P1 million to P2 million tonnes of coal per annum."
Morupule, the country’s oldest colliery, currently produces 2.8 million tonnes of coal per year, but through an expansion known as Motheo due to launch by mid-year, will be adding another 4.2 million tonnes in the years to come. Officials say looking at the current demand, even this additional capacity may not be enough.
“Looking at the current demand, we might have to build another (coal wash) plant.
“We have to ramp up production,” said Elias.
The turnaround in coal’s fortunes is confirmed by Minergy Coal, where CEO, Morne du Plessis, says enquiries are rolling in. Minergy’s Masama Mine, which opened three years ago, typically supplies up to 90% of its production to land markets in South Africa and Namibia but has seen an uptick in overseas demand.
“A massive increase in demand from international markets, stemming from the Ukraine war and sanctions on Russia has come as a blessing to Minergy as lucrative pricing has made once uneconomical logistics feasible,” du Plessis explains.
“This has allowed Minergy to place an additional product in new markets, markets historically uneconomical.
“We continue to look for alternative markets and supply to Namibia is one such market as well as the ability to use their ports as export routes for seaborne thermal coal.”
According to the CEO, in the last three months, sea-bound exports have increased significantly with international traders buying to export to Europe and the West.
“We do not have specific numbers because the final destination overseas is determined by the international traders who buy coal from us.
“We remain hopeful that this demand continues,” he says.
Sitting on a 390 million tonne resource, Masama has nameplate capacity to produce 125,000 tonnes of coal per month.
Du Plessis says while coal is back in play in Europe because of the war, the resurgence of the much-maligned mineral also indicates that it still has a role to play even in the transition to cleaner alternatives.
“There are over 80 countries in the world who still rely on coal as a form of energy,” he explains.
“These are countries that are fighting to have basic necessities like electricity, which research shows increases their quality of life substantially.
Energy poverty is real in Africa, India and Asia.
“The Western approach to coal cannot be universal.”
The CEO adds: “Demand for coal in Europe right now is driven by sanctions on Russian gas and coal and show that Europe might well be over-exposed to 'green' with no back-up at times when there is no wind, running water, endless sunshine or faced with supply shortages.
“Coal is back in play in Europe because of the war, and despite massive adoption of clean energy in the US not all of the US uses clean energy.
“In Germany and Italy, coal-fired power plants that were once decommissioned are now being considered for a second life.
“In South Africa, more coal-laden ships are embarking on what’s typically a quiet route around the Cape of Good Hope toward Europe.
“Coal burning in the US is in the midst of its biggest revival in a decade, while China is reopening shuttered mines and planning new ones.
“Coal remains and will remain an essential element in the energy mix.
“We need to make use of cleaner coal in such mix.”
Meanwhile, government will be feeling vindicated by its decision at the Glasgow climate conference last November, to resist pressure to stop issuing new coal mining licences.
Government indirectly owns Morupule Coal through the Minerals Development Company, while other state-affiliated entities such as the Botswana Development Corporation and Botswana Public Officers Pension Fund have been instrumental in funding Minergy.
The window of opportunity, however, is not permanent and at a conference this week, minerals minister, Lefhoko Moagi, urged Morupule Coal to "move boldly" and “take advantage of global coal demand, especially from Europe and the Far East”.
A mineral hated by the world is enjoying a rare day in the sun, albeit temporarily.
