Thermal coal price up 15 percent

BY ZBC Reporter

Thermal coal price has increased by 15 percent, about half of what the producers had asked for, a grouping of major Zimbabwe’s coal producers have said.

The price of thermal coal, used to generate electricity, went up to US$30 per tonne from US$26.

Coal producers had asked for US$33 per tonne.

The price is pegged in United States dollars but Zimbabwe Power Company, a subsidiary of Zesa Holdings responsible for power generation pays in local dollars at the prevailing official exchange rate.

“Zesa was not prepared to give us US$33 per tonne without an upward review of power tariff so the maximum they could give us was US$30,” Coal Producers Association chairman Raymond Mutokonyi told Business Weekly in an interview.

Zesa last increased power tariffs in February this year.

“The new coal price is still unviable and is choking our operations especially when we look at the gap between the official exchange rate and black market rates.”

The official rate rose to 63,7 against US$1 in a second weekly auction on Tuesday but is trading at around 100 on the black market. Most prices in Zimbabwe track the parallel market rates.

Coal producers also require huge amounts of foreign currency to import fuel and various consumables.

“We are still pushing for a further upward review so that we become viable. Production has gone down by about 40 percent year on year and this is a threat to power generation.

“We have not supplied small thermal power stations for the past five months while the strategic stockpile at Hwange thermal plant is significantly below acceptable levels,” said Mutokonyi.

Efforts to get a comment from Zesa were fruitless.

About 90 percent of local coal production is used for power generation, mainly at Hwange power plant whose output is nearly half of local power production.

Concerned with “lack of capacity” by local miners, Zesa is already considering investing in coal mining to ensure guaranteed supply of fossil fuel especially when Hwange unit 7 and 8 comes on line in 2022 which will add 600 more MW onto the national grid.

The coal price has been fixed at US$26 per tonne since July 2011 — now being paid in local currency at the prevailing interbank exchange rate.

Mutokonyi said all inflationary pressures were being absorbed by the miners. He said the average cost for mining, processing and delivery of coal to Hwange Power Station, for instance, is US$30,30 per tonne.

Regional comparisons for similar coal mines in Botswana and Zambia place the price of similar power coal at average US$40 per tonne.

South Africa has a wide range from US$20 to US$50 due in part to the structured prices infused into the mine financing models provided by Eskom, its power utility.

A base price of US$33 per tonne, linked to the interbank rate, for coal delivered to Hwange Power Station increase in export proceeds retention to 80 percent from the current 50 percent would enhance the viability of the miners, the association said.

The miners have also proposed ring-fencing of some revenue inflows to Zesa — both in foreign currency and Zimbabwean dollars to ensure timely payment of coal supplies.