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Australia, South Africa miners eye options as Europe makes desperate calls -Breaking

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© Reuters. FILEPHOTO: An employee drives a vehicle in Zimplats Ngwarati Mine (Mhondoro-Ngezi) May 30, 2014. REUTERS/Philimon Bulawayo/File Photo

Praveen Menon, Helen Reid

(Reuters) – South African and Australian miners explore ways of supplying coal and metals to European consumers. However, logistical and cost limitations make it hard to quickly increase output.

Since Russia invaded Ukraine on February 24, 2014, prices for palladium and coal have risen dramatically, as sanctions against Moscow force Western buyers to buy Russian supplies.

Major producers stated that customers are reaching out to suppliers who do not have any existing relationships in order to get the commodity they need. Long-term contracts are a common way for miners to secure surplus supplies.

The automakers used palladium to make engine exhausts in order to cut emissions. But, Monday’s record set was quickly broken. Russia is home to 25-30% world palladium supplies.

Sibanye–Stillwater in South Africa, which is the largest platinum producer in the world, stated that clients had asked about the company’s ability to produce more PGMs. However, it said that the firm has limited flexibility in increasing production “any material manner” over the medium to short term.

Sibanye replied to Reuters’ queries by saying that it was possible to accelerate projects, but not a fast fix. It will usually take months or years for the benefits of these projects to become apparent.”

According to Neal Froneman, CEO of Sibanye, automakers who use palladium for engine exhausts in order to reduce emissions will switch over from palladium to platinum if the palladium price remains high.

According to Wednesday’s forecast by the World Platinum Investment Council on Wednesday, 42% will be accounted for this year in platinum demand, up from 37% for 2021.

Uncertainty over Russian supplies has caused the platinum price to increase, although it is expected to be more muted this year as oversupply of platinum continues to exist.

South Africa’s Impala Platinum (OTC) is the world’s third-largest manufacturer of PGMs. However, it also claimed that its capacity is limited to meet the demand for palladium from Russia. Sibanye stated that Russia’s Norilsk Nickel produces approximately 38% and 11% respectively of the global palladium, respectively.

While miners may be benefiting from increased metal prices, Sibanye’s Froneman warned that supply chain disruptions can have a detrimental impact on future demand.

Automobile manufacturers are facing more challenges in making electric vehicles affordable by using expensive metals.

SHUNNING RUSSIAN COPAL

Europe’s coal supply is 70% dependent on Russia, but companies are now looking to Australia for fuel.

“Due to the conflict, we are fielding requests from Europe for security of met coal supply,” said Gerhard Ziems, group chief financial officer of Coronado, one of the world’s largest producers of metallurgical coal, used in steelmaking.

He stated that Coronado would increase output by about 18-19 Mt in 2022, up from 17.4Mt the previous year. Ziems estimates that Russia exports approximately 45 million tonnes per annum of its met coal. 

According to him, “In times where the international community shuns Russian coal supply shortfalls must be sourced elsewhere which includes established markets like Australia or the U.S. In which Coronado operate.”

Whitehaven Coal and New Hope Group (OTC:) are Australia’s most prominent independent producers. They said that they had been approached to provide coal for countries like Poland. However, the former said it would be looking to get supplies to the European market.

Whitehaven spokeswoman said that the company has spot and contract sales. This allows it to profit from tactical opportunities on the market.

Australia’s government declared last week it was helping its western coal importers to discover alternatives to Russia and would connect them with local producers.

Glyn Lawcock of Barrenjoey’s mining research said that while the idea seemed simple, execution proved difficult as Australian miners had already been flat-out.

It’s not as if there are volumes of material lying around that can be used. Lawcock stated that Russia/Ukraine produces top-quality pellets for the markets. “There isn’t anyone sitting on excess material.”

As a reminder of the tight market, the coal price for loading at Newcastle, Australia’s largest coal port, rocketed up to $440 per tonne last week, five times more than a year ago.

Keith Pitt, Australian Resource Minister, said that there was an opportunity to exploit this for Australian miners. He also called for increased coal mining in Australia as they could be used by desperate European countries to get off Russian coal.

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