South African coal producer Thungela Resources reported a slight dip in domestic coal output in the first half of the year, while production at its Ensham mine in Australia saw a significant recovery.

However, the company said it failed to fully benefit from elevated international coal prices driven by geopolitical conflicts, constrained by legacy pricing contracts.

Thungela expects its South African commercial coal output to reach around 6.3 million tonnes in January-June, down about 100,000 tonnes from a year earlier. To hit the midpoint of its full-year guidance of 13-13.6 million tonnes, it would need to mine 7.1 million tonnes in the second half.

Chief Financial Officer Deon Smith attributed the output decline to conveyor belt issues at the Zibulo mine in Mpumalanga province, which are expected to be resolved after a planned shift to the Zibulo North area.

Despite lower output, Thungela's coal sales via the Richards Bay terminal rose nearly 1 million tonnes year on year to 7.5 million tonnes in the period, helped by improved rail capacity from state-owned freight operator Transnet and unused quotas released by other miners.

Export coal prices strengthened significantly after the Middle East conflict triggered by a US-Israeli attack on Iran in February. The API4 Richards Bay benchmark averaged around $104/t in the first five months, sharply up from about $91/t a year earlier. But Thungela's average realized price for South African coal was only $87.60/t, a 16% discount to the benchmark, due to sales from lower-quality stockpiles.

At the Ensham mine in Queensland, acquired in 2023, output rose 25% to 2 million tonnes in the first half as geological conditions improved. The company maintained its full-year production target of 3.9-4.2 million tonnes.

However, Thungela noted that most of Ensham's output was already contracted at fixed prices before the February conflict, preventing it from capitalizing on the rise in the Newcastle benchmark.

Thungela said coal prices are tracking oil and gas markets, supported by geopolitical tensions and risks to shipping through the Strait of Hormuz, but physical demand remains weak. Indian buyers are favoring cheaper lower-grade coal, while other Asian importers are turning to more competitively priced Russian and Colombian coal, squeezing market share for high-CV coal from South Africa and Australia.