Miners in Australia and South Africa mull options as Europe makes desperate pleas By Reuters

By Helen Reid and Praveen Menon

(Reuters) – Australian and South African miners are exploring ways to supply coal and metals consumers in Europe seeking alternative sources to Russian supplies, but logistical and cost constraints make it difficult to scale up rapid production, the companies said.

Prices for palladium, coal and other raw materials have soared since Russia invaded Ukraine on Feb. 24, as sanctions on Moscow push Western consumers to replace Russian supplies.

Customers are approaching suppliers with whom they have no existing relationship, desperate to secure products, major producers said. Miners typically use long-term contracts, which makes oversupply rare.

Palladium, used by automakers in engine exhaust to reduce emissions, hit a record high on Monday before falling back. Russia accounts for 25-30% of the world’s palladium supply.

South Africa’s Sibanye-Stillwater, the world’s largest primary platinum producer, said some customers had asked about its ability to produce more platinum group metals (PGMs), but it was very little flexibility to increase production in “any material way” in the short term. medium term.

“It is possible to accelerate projects but (…) it is not a magic bullet and it will usually take months or even years before the benefits are apparent,” Sibanye said in response to the comments. questions from Reuters.

Automakers, which use palladium in engine exhaust to reduce emissions, will begin replacing palladium with platinum if palladium prices remain high, Sibanye CEO Neal Froneman said last week.

The automotive industry is expected to account for 42% of overall platinum demand this year, up from 37% in 2021, according to forecasts by the World Platinum Investment Council on Wednesday.

Platinum prices also rose on Russian supply uncertainty, but more subdued as platinum is expected to remain oversupplied this year.

South Africa’s Impala Platinum (OTC:), the world’s third-largest producer of palladium, also said it had limited capacity to fill the gap left by Russian palladium supplies. Russia’s Norilsk Nickel alone produces around 38% of the world’s palladium and 11% of the world’s platinum, Sibanye said.

As miners profit from rising metal prices, Sibanye’s Froneman warned that supply chain disruptions could have a destructive impact on downstream demand.

More expensive metals are also a headache for automakers hoping to make electric vehicles more affordable.

AVOID RUSSIAN COAL

European companies, which depend on Russia for 70% of their coal supplies, are also turning to Australian miners for fuel supplies.

“Because of the conflict, we are responding to Europe’s demands for security of coal supply,” said Gerhard Ziems, chief financial officer of Coronado Group, one of the world’s largest producers of metallurgical coal, used in the steel industry.

Coronado will increase production to around 18-19 million tonnes (Mt) in 2022 from 17.4 Mt last year, he said. Ziems estimated that Russia exports about 45 million metric tons of met coal per year.

“In circumstances where the international community avoids Russian coal, supply shortages must come from elsewhere, including established markets such as Australia and the United States in which Coronado operates,” he said. declared.

Australia’s leading independent producers, Whitehaven Coal and New Hope (OTC:) Group, said they had been approached to supply countries, including Poland, that traditionally depended on Russian coal, and the latter said it was looking for ways to to supply the European market. .

“We have a mix of contract and spot sales, which allows us to take advantage of tactical opportunities in the market,” a Whitehaven spokeswoman told Reuters.

The Australian government said last week it would help its Western coal-importing allies find alternatives to Russia for supplies by connecting them with local producers.

Glyn Lawcock, head of mining research at Barrenjoey, said that while the idea sounded simple, the execution was not, as Australian miners were already in full swing.

“It’s not like people have volumes to distribute. Ukraine/Russia produces high quality pellets for the markets…there’s no one dealing with surpluses,” said Lawcock.

In a sign of market stress, coal prices for loading at Newcastle – the world’s largest coal port on Australia’s east coast – soared to a record $440 a tonne last Wednesday, a five-fold jump from compared to a year ago.

Australian Resources Minister Keith Pitt said this was an opportunity for Australian miners and called for the expansion of coal mining in the country as it could help desperate European nations wean themselves off the Russian coal.