Exxaro Resources Limited
Integrated report 2022

Our operating context

Exxaro's macro-economic operating context and commodity markets include global and domestic factors that affect our ability to create value for our stakeholders over time.

Our broader operating context: trends influencing our business


1 Global and domestic economic conditions

The Russia-Ukraine conflict and renewed COVID-19 lockdowns in China are among the series of economic shocks that disrupted supply chains, fuelled inflation, increased energy costs and slowed global economic growth. After a strong finish to 2021 at 6.1%, global economic expansion lost momentum in 2022, with a slower growth rate of 3.0%.

Financial market conditions deteriorated during the second half of 2022, and the global economic outlook for 2023 has weakened to fall short of potential growth levels. The end of 2022 experienced the weakest growth and the global economy remained at its highest vulnerability in early 2023, when any major economic shock could have tipped the world economy into recession.

Global gross domestic product (GDP): 3.0% (2021: 6.1%)
Real GDP growth rate (%)
2022 2021
World 2.1 3 6.1
US 0.7 2 6
Eurozone 0.50 3.6 5.4
China 5.2 3 8.5
India 5.1 6.7 9.1
South Africa 0.6 2.0 4.9
Russia (1.32) (2.20) 4.8
Ukraine 8.0 (35.4) 3.4
Source: S&P Global, February 2023.

South Africa's real GDP surpassed its 2019 level in the first quarter of 2022, signalling complete recovery from the COVID-19-induced recession of 2020. Subdued growth in 2022 reflected the lingering effects of unrest in July 2021, extensive flooding in April 2022, slowing global growth and inadequate electricity supply. Speedy and judicious implementation of energy reforms could raise private investment to benefit economic activity.


  • Russia-Ukraine conflict
  • Renewed COVID-19 lockdowns in China
  • Slower global economic growth
  • Unrest in July 2021 and extensive flooding in April 2022 in South Africa
  • Inadequate electricity supply in South Africa

Implications for Exxaro

  • South Africa's energy mix and demand
  • Higher inflation on operations
  • Higher interest rates

Our strategic response

  • Cost management
  • Customer engagement
  • Supplier engagement: cost
  • Logistics: ensure passage of coal to ports


ESG is an integral part of our Sustainable Growth and Impact strategy. To this end, the executive committee established an ESG steering committee to coordinate the integration of the ESG risks and opportunities and ensure outcomes-based measurements and assurance. These include decarbonisation and social impact.

Global responses to climate change are driving economic reforms, commitments and regulations to steer decarbonisation efforts. The 2022 UN Climate Change Conference (COP27) finalised the details of a work programme to urgently scale up mitigation, ambition and implementation in this critical decade. During this conference, issues impacting developing countries and businesses operating in these countries were highlighted and included:

  • The submission of ambitious nationally determined contributions (NDCs) by countries: South Africa submitted ambitious NDC targets for 2025 and 2030. It is envisaged that these targets will impact Exxaro and other businesses through stringent climate change policies, carbon prices and carbon budgets
  • Low-carbon technologies such as hydrogen and carbon capture storage are associated with high costs and not commercially available
  • Energy storage: Challenges associated with storing renewable energy will impact decarbonisation efforts of businesses like Exxaro, which are targeting 100% consumption of renewable energy and reduction of scope 2 emissions
  • Carbon pricing: The EU's Carbon Border Adjustment Mechanism and its potential impact on developing countries and businesses operating in these countries. There might be future financial implications for Exxaro associated with carbon-intensive products for export to the EU

Social impact is an outcome our Sustainable Growth and Impact strategy and addresses material social and compliance matters that concern stakeholders.


  • ESG is a priority for all stakeholders
  • Integration of ESG into corporate strategies, decision making and stakeholder reporting
  • Countries pledged to scale up carbon mitigation, ambition and implementation
  • South Africa aims to access significantly higher levels of climate finance during the implementation of NDCs
  • An increasingly distressed socio-political and strained economic operating environment characterised by inequality, unemployment and poverty

Implications for Exxaro

  • It is imperative for us to demonstrate our ESG commitments as this impacts shareholders' assessments of our company and our social licence to operate
  • Stringent climate policy and carbon prices
  • Increase decarbonisation efforts
  • Global energy demand and transition
  • Social impact should result in a harmonious co-existence between Exxaro and local communities, creating a thriving environment

Our strategic response

  • Established an ESG steering committee
  • Separate annual ESG report
  • Invest in and expand a diversified minerals and renewable energy business
  • Energy efficiency and scope 1 emission reduction
  • Renewable energy installation (scope 2 emission reduction)
  • The Social Impact strategy aims for a market-driven, multidimensional and scaled approach to improve the lives of communities. It aims to shift from inequality, unemployment and poverty to empowered communities with skills and capabilities
  • Upskilling will enable employment and entrepreneurial opportunities, which creates economic wellbeing, social progress and dignified livelihoods
Creating value through stakeholder engagement
Our environment
Social licence to operate

3 Geopolitics

Global geopolitical tensions continued to impact supply-demand dynamics for key Exxaro commodities. The Russia-Ukraine conflict and subsequent sanctions, and continuing US-China and China-Australia tensions were evident during 2022. The European Union's ban on coal imports from Russia and the restart of thermal power plants significantly impacted supply-demand balance, trade flows and seaborne thermal coal pricing.


  • Russia-Ukraine conflict
  • China import restrictions on Australian coal
  • Global supply chain disruptions

Implications for Exxaro

  • Opportunities in the European thermal coal market
  • Higher but volatile seaborne thermal coal prices
  • Availability and/or higher costs of material input

Our strategic response

  • Market strategy adapts to changing global flows
  • Market to resource optimisation
  • Increased collaboration with stakeholders

4 Foreign currency market

Economic turmoil usually brings about two key dynamics of the US dollar:

  • The US dollar's continued role as the dominant global reserve currency and the corresponding role played by the Federal Reserve as the world's central bank
  • The view that US dollar assets, especially US treasury bills and bonds, are regarded as safe havens

This was no different during 2022. As central banks significantly increased interest rates with recessionary risks on the horizon, the US dollar's exchange value soared in response to rising US dollar bond yields and investor flight to safety. This added to inflation and financial stress in developing and emerging countries.

In South Africa, the rand weakened by 10.7% during 2022 on the back of the strong US dollar, declining commodity prices (with the exception of the energy complex), flight to safety and recessionary risks. The US$/R exchange rate is expected to remain volatile in 2023, mainly dependent on whether the surge in inflation is brought under control by the major central banks and recessionary risks.


  • US dollar strength
  • Recessionary risk sentiment
  • Increasing interest rates to curb inflation

Implications for Exxaro

  • Forex volatility, weaker exchange rate favourable to local exports

Our strategic response

  • Rand-based pricing for input products
  • Limited hedging
  • Local sourcing

5 Inflation and interest rates

Persistent high inflation led to the world's major central banks tightening their monetary policies. In 2022 we saw high interest rate increases and a resolve to restrain actual and expected inflation. Policy trade-offs are challenging as inflation extends beyond food and energy, with risks that over-tightening could tip the global economy into a severe recession and under-tightening could further entrench inflation.

In 2022, South Africa's headline inflation averaged 6.9%, and is expected to remain above the mid-point of the South African Reserve Bank's inflation target range of 3% to 6% during 2023. The repurchase rate increased by a cumulative 300 basis points during 2022. Further normalisation into 2023 may be needed to raise rates to levels consistent with a stable and lower inflation rate.


  • Persistent high inflation
  • Interest rate increases
  • Monetary policy trade-offs

Implications for Exxaro

  • Cost and revenue escalations
  • Borrowing cost increases

Our strategic response

  • Inflation-linked escalations
  • Reduce debt levels
  • Cost management

6 Cyber threats

Exxaro's Digital@Exxaro programme is a key catalyst in driving modernisation and digital transformation.


  • Digital and technological innovation enables improved productivity, safety and environmental management in the mining industry

Implications for Exxaro

  • The programme has enabled data-driven decision making and drives end-to-end integration and optimisation of our value chain to remain competitive

Our strategic response

  • The Exxaro digitalisation and innovation journey is a strategic initiative driven by the CEO
  • Our award-winning Digital@Exxaro programme is transforming our company culture to ensure we are more open and agile when we engage with internal and external stakeholders
Driving innovation and information management

Our markets

During 2022, global markets were affected by the impact of the Russia-Ukraine conflict, renewed COVID-19 infections and lockdowns in China, mixed and volatile commodity prices, continued supply chain disruptions, inflationary and interest rate pressures and global recessionary risks.

Commodity markets 7

Exxaro's commodity markets recorded mixed and volatile performances in 2022. The energy complex markets remained relatively tight compared to industrial mineral markets. Key drivers included the Russia-Ukraine conflict, resurgent COVID-19 infections and lockdowns in China, supply chain disruptions and recessionary risks.

API4 coal export price averaged US$270.87/t (2021: US$124.12/t)
Commodity prices (US$/t)
Commodity 2023 forecast 2022 2021
Thermal coal (RB1) 150 270.87 124.12
Thermal coal (RB3) 120 206.05 95.59
Iron ore fines 110 120.03 159.89
Lump premium 11 13.92 22.58
Source: Various commodity market intelligence reports, September 2022 and February 2023.


  • Mixed price performance
  • European energy insecurity
  • Recessionary risks
  • Supply constraints

Implications for Exxaro

  • Volatile commodity markets
  • Higher received prices for coal exports

Our strategic response

  • Portfolio management
  • Maximise coal exports

Coal markets 7.1

Thermal coal demand remained robust in 2022, largely driven by the higher coal demand from Europe. With the onset of the Russia-Ukraine conflict in March 2022, thermal coal markets experienced significant disruption and volatility as Europe sought alternative high-quality coal supply to reduce dependency on Russia. Low gas stocks, high gas pricing and uncertainty over energy security supported gas to coal switching in Europe.

As the spot demand for high-quality coal increased, record high global thermal coal prices were reached in 2022. With the implementation of the European embargo on Russian coal and the continued Chinese ban on Australian coal imports, global coal flows changed to respond to the new market dynamics. Exports from South Africa into Europe increased and displaced Russian coal was exported to Indian and Chinese markets.

Global thermal coal supply remained tight for most of the year with factors such as heavy rainfall, rail challenges and labour issues impacting the major supply regions and providing pricing support.

Pricing declined from the highs in the second half of 2022, as the European market entered winter season well stocked on coal and gas inventories and experienced milder than normal winter temperatures which in turn lowered heating requirements.

In South Africa, domestic demand remained robust throughout the year. The higher export price improved the attractiveness of alternative export distribution channels allowing for volumes normally destined for the domestic market to be sold in the international market. The resulting domestic supply tightness resulted in higher domestic prices.

Volatility and high prices were the key hallmarks of the 2022 global market for hard coking coal. Market tightness throughout the year was due to supply-side challenges out of Russia and Australia. As 2023 progresses, market prices are expected to trend downward as the results of stronger supply out of Australia, and modest demand, while the positive sentiment out of China is expected to be mostly outweighed by weakness in Europe.


  • Russia-Ukraine conflict
  • European gas, carbon and coal price shocks
  • Dynamic global trade flow

Implications for Exxaro

  • High API4 index price
  • Market volatility

Our strategic response

  • Early value coal strategy
  • Market to resource optimisation
  • Alternative routes to market

Coal logistics 7.2

Transnet Freight Rail (TFR) railed 50.43Mt to RBCT from January to December 2022, compared to 58.12Mt for the same period in 2021. Rail was constrained throughout the year due to locomotive availability and security-related incidents, strike action and multiple derailments. Given these challenges, TFR reduced the contractual and performance commitment from 81Mtpa to 60Mpta for the 2022/2023 period.

Exxaro's export sales reduced from 7.6Mt in 2021 to 5.2Mt in 2022 due to lower railings to RBCT. To mitigate the impact of the lower rail performance, Exxaro has successfully exported via alternative export ports and continues to strategically develop alternative routes to market.


  • Security-related downtime (cable theft, vandalism and sabotage)
  • Locomotive availability

Implications for Exxaro

  • Reduced export volumes and increased cost of alternative logistics channels

Our strategic response

  • TFR engagement
  • Develop alternative routes to market

Iron ore market 7.3

At the start of 2022, the iron ore price was stable, supported by strong Chinese steel production, despite the ongoing property weakness and widespread re-established COVID-19 lockdowns in China. However, the market softened during April/May, after which sentiment strengthened as new stimulus measures were announced by the Chinese government and lockdown restrictions eased. Weak demand sentiment in China and Europe and global recession risks weighed on the iron ore market for the rest of the year.

We anticipate a relatively flat annual global steel production level for 2023. Higher iron ore supply and expected steady demand will likely see seaborne prices testing cost curve support levels. Higher steel production from China presents a key market opportunity and lower-than-expected seaborne supply poses a risk to the market.


  • Volatile Chinese steel production
  • Weak demand sentiment in China and Europe
  • Global recession risk

Implications for Exxaro

  • Performance of SIOC investment

Our strategic response

  • Exposure to higher-value iron ore lump product
Coal rail transport at grootegeluk mine

Coal rail transport at Grootegeluk mine

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Driving transition through leadership
Driving value creation through transition
About our integrated report
Chairperson's statement
About Exxaro
Sustainable growth and impact
Our operating context

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Our business model
Our material matters
Our business risks and opportunities
Creating value through stakeholder engagement

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CEO's report
Our strategy: positioning Exxaro for sustainable growth and impact
Performance against our strategy and future focus
2022 strategic key performance indicators
Key strategic trade-offs

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Our leadership
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Finance director's overview
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Social licence to operate: enabling our legitimacy
Our environment: stewardship and compliance
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