Operating context

The freight logistics system reform, which is part of South Africa’s structural reform priorities under Phase II of Operation Vulindlela, reported significant progress during 2025. This included enabling open access to the freight rail network, with capacity allocated through 42 conditional slots to 11 private train operating companies across the iron ore, manganese, coal, chrome, and general freight and automotive intermodal corridors. Another key milestone was reached in the Department of Transport’s initiatives to restore rail infrastructure through infrastructure investment, namely the progress made with private sector participation in the main rail freight corridors. The Department of Transport issued a request for information for rail and port public-private partnership opportunities, signalling continued progress towards sector liberalisation and private participation. The issuing of and request for proposals for specific corridors is expected in 2026.

A revised Transnet network statement will likely be published in early 2026. It will establish an effective framework for operators to access the network on fair and commercially viable terms. Furthermore, Transnet’s Recovery Plan – which aims to increase rolling stock availability and reliability, address the rail network’s maintenance backlog, enhance customer collaboration and reduce security incidents – is yielding positive results.

TFR increased the throughput rate to Richards Bay despite cable theft, power failures, locomotive and wagon shortages, and deteriorating infrastructure. Amid the rail wash-away in quarter one, Exxaro recovered and recorded improved performance compared to 2024. RBCT volumes improved to 56Mtpa (2024: 52Mtpa), with stronger performance in the second half of 2025. Rail execution remains volatile but has improved, particularly in Mpumalanga. In Waterberg, train frequencies averaged three trains per week in 2025, and, in collaboration with TFR, the aim is to increase the frequency to the originally designed capacity.

Exxaro’s export evacuation via rail to RBCT increased to 5.7Mt (2024: 5.2Mt) despite the wash-away and continued disruptions. Evacuation to alternative ports reduced to 1.4Mt (2024: 1.8Mt) due to the economic environment of coal prices and evacuation costs.

After repeated rounds of escalation and de-escalation during 2025, the US administration rolled out a series of tariffs and trade deals. As a result, global trade dynamics shifted, inflationary pressures re-emerged, and global sentiment and financial market volatility were evident. Despite these challenges, global economic activity remained resilient, with global real gross domestic product (GDP) improving marginally from 2.8% in 2024 to 2.9% in 2025.

Since April 2025, trade-related risks have moderated, following the US reversal on the reciprocal tariffs and renewed negotiations with China. These actions had a positive effect on financial and commodity markets, with equity indices, crude oil prices, and the US dollar rebounding. However, global economic momentum remained fragile due to the unpredictability of US trade policy.

Global GDP: 2.9% (2024: 2.8%)

South Africa’s economic activity was slow at the beginning of 2025, with GDP growth at 0.1% in the first quarter. Robust household and government consumption expenditure led to a 0.8% recovery in the second quarter. Savings withdrawals from the two-pot pension system enabled the rise in household consumption expenditure. Growth momentum continued during the year, albeit at a slower pace – 0.3% and 0.4% expansion in the third and fourth quarters, respectively – with a decline in exports following the introduction of a 30% tariff on all South African exports to the US in August and the suspension of the African Growth and Opportunity Act at the end of September 2025. This was partly offset by strong expansion in South African exports to Europe and an improvement in South Africa’s terms of trade. South Africa’s removal from the Financial Action Task Force grey list and the S&P Global Ratings upgrade of the foreign currency sovereign credit rating mark an important step towards reaching an investment-grade rating. The formation of the Government of National Unity (GNU) elicited early investor and business optimism. Despite being stress-tested by various issues during 2025, the GNU continued to hold, with notable improvements and opportunities to mature.

Real fixed investment spending declined by 2.2% in 2025. Sustained high interest rates, combined with mounting business and investor uncertainty amid rising global and domestic volatility, delayed significant private sector investment. Policy reforms in South Africa’s energy, water, ports, and railway sectors continued, with a strong focus on public-private partnerships underscoring future investment in public sector infrastructure.

Collectively, these factors contributed to South Africa’s real GDP growth of 1.1% for 2025.

In 2025, geopolitical and geoeconomic tensions intensified, fragmenting international relations, global trade and the economic landscape. These developments affect Exxaro through multiple interconnected channels. Market dynamics are shifting, resulting in changes in commodity supply-demand pricing, increased volatility in global financial markets and an uncertain outlook for GDP and foreign investment. Policy and regulatory pressures are also increasing as foreign policy changes, sanctions, trade policies, anti-dumping duties and countervailing measures lead to tighter customs environments and delays. Furthermore, global inflation and interest rate policies continue to influence the macro-economic context, while infrastructure challenges and energy transition considerations add more pressure.

Geopolitical tensions in the Middle East affected global energy markets, impacting thermal coal, oil, gas and liquefied natural gas (LNG). The ongoing Russia-Ukraine conflict continued to impact supply-demand pricing dynamics for key Exxaro commodities, while presenting opportunities in the Japanese and South Korean thermal coal markets. Several countries have joined the US and the European Union (EU) in exerting pressure on Russia to end its war with Ukraine.

China-US strategic competition intensified until a framework agreement was reached to avoid tariff hikes and non-tariff trade barriers were announced in October 2025. This signalled intent to bring greater certainty to China-US trade relations and enable follow-on talks towards a comprehensive trade agreement. There is cautious optimism that a trade deal can be reached, despite previous deals or frameworks since April 2025 falling through for various reasons.

South Africa’s relationship with the US was strained. As a result, the US, among other actions against South Africa and other countries, paused all United States Agency for International Development support, implemented a 30% tariff on all exports to the US, withdrew Just Energy Transition Partnership support, and caused uncertainty over South Africa’s eligibility under African Growth and Opportunity Act.

Global election outcomes and upcoming elections further shaped the geopolitical landscape. Of significance is the December 2026 US midterm election, which could change the composition of Congress, potentially limiting Trump’s ability to execute his agenda. Political pressure from US citizens intensified amid rising product prices and concerns over availability. In China, political pressures are unlikely to have a significant effect on the presidency.

Global economic, political, and technological shifts and uncertainties inform the operating environment and the speed and trajectory of the energy transition. In 2025, it was widely accepted that the global push to tackle climate change had slowed and that the world was not yet positioned to achieve net zero emissions by 2050. Although the energy transition has progressed significantly, geopolitical and economic challenges, such as the COVID-19 pandemic, wars in Ukraine and the Middle East, and unpredictable trade tariffs, hindered momentum. In addition, rising populations, economic growth and societal aspirations, particularly in developing countries, are driving energy demand higher and outpacing improvements in energy efficiency.

During 2025, several governments prioritised securing affordable energy over their sustainability goals. The US’s withdrawal from the Paris Climate Agreement and the exit of US banks from the Net Zero Banking Alliance, along with some European banks, signalled a change in priorities. Trade tensions and the race towards an artificial intelligence (AI)-enabled future are also changing the shape of energy demand and the industrial landscape.

While renewables’ share of global power supply increased from 5% to 20% over the past decade, it barely met incremental demand growth. Globally, scaling up low-carbon supply faster than demand and building a deeply decarbonised, resilient energy system is proving to be more challenging than expected. However, evidence suggests that the global energy transition has slowed or been delayed in some instances, but not halted.

South Africa’s transition to a low-carbon economy aims to drive economic growth, create jobs, increase energy security and access, while addressing climate change. However, socio-economic inequalities and energy poverty play significant roles in shaping the pace of the transition. South Africa remains behind in transitioning the energy value chain of generation, transmission and storage, and requires significant investment to achieve energy security and its net zero goals by 2050.

Global inflation continued its gradual decline in 2025, driven by moderating energy and food prices, currencies strengthening against the US dollar, and the lagged effects of tighter monetary policies and cooling labour markets. Following an average of 4.2% in 2024, global inflation declined to 3.2% in 2025. In the US, the Federal Reserve kept interest rates unchanged from December 2024 until September 2025, after which the easing cycle continued. In contrast, the European Central Bank reduced rates more decisively throughout the year, supported by subdued demand, lower energy prices and a stronger euro. The Bank of England also lowered rates, while the Bank of Japan kept rates steady.

In South Africa, inflation remained subdued after falling to the lower bound of the 3% to 6% target band during the second half of 2024. Headline inflation averaged 3.2%, down from 4.4% in 2024, driven by lower and stable Brent crude oil prices, a stronger rand and resultant lower fuel prices, with food prices contained for most of the period. The cumulative repurchase rate declined by 75 basis points during 2025, following a 50-basis point decline during the latter part of 2024. With sustained low inflation, the South African Reserve Bank (SARB) announced a shift in its preferred inflation objective from 4.5% to 3%. According to the SARB, Monetary Policy Committee policy decisions are guided by the 3% point target, even though the official target includes a tolerance band of one percentage point either side of 3%. This environment of subdued inflation – and the aim to anchor it lower – with favourable interest rates, impacted Exxaro through lower cost escalations and borrowing costs reductions. While headline consumer and producer inflation declined significantly, the benefits of lower inflation have yet to fully offset mining input cost escalations.

The US dollar remained resilient through most of 2025, supported by US economic strength, recession concerns, and a relatively tight Federal Reserve monetary policy. Elevated interest rate differentials, expansive fiscal policy and increasing geopolitical risks also supported the dollar, alongside related financial market flows. This resilience was underpinned by the US dollar’s status as the dominant global reserve currency and safe haven for assets during periods of uncertainty and market volatility.

After rising strongly against most currencies, the dollar reached a multi-year high in January 2025, before declining sharply in March 2025. The causes of this shift include escalating trade tensions, increasingly volatile financial market conditions, potentially inflationary effects of higher tariffs, US Federal rate cuts, less favourable yield differentials, the persistent US external deficits, and reduced appetite for US assets. Consequently, in addition to the strong investment flows and central bank buying of gold, most advanced and emerging market currencies strengthened against the dollar, with advanced economy currencies such as the Japanese yen, Swiss franc and euro benefiting.

Currency volatility and a weaker US dollar (stronger rand) impacted Exxaro negatively, with lower coal export earnings.

ESG is a business and social imperative, and fundamental to our Sustainable Growth and Impact strategy. Stakeholders are increasingly assessing companies’ success not only in terms of financial performance, but also in terms of environmental impacts, social responsibility and ethical leadership. Investors are considering ESG factors in their investment decision making, more customers are favouring ethically sourced products and employees are seeking out employers that reflect their values and goals. At the same time, governments are tightening ESG regulation. For a company to be sustainable in the long term, it must respond to each of the E, S and G elements intentionally and appropriately. Furthermore, expectations for transparent ESG reporting are intensifying, with greater emphasis on due diligence, increasing regulatory requirements, converging reporting standards, and reporting transparency and comparability.

Climate change and biodiversity loss are further driving stakeholder expectations around strong ESG practices. In addition, social issues, including inequality and human rights, require companies to consider all key stakeholder groups in their business strategies. Ethics, transparency and strong leadership are crucial for organisations to remain resilient to these factors and adapt to changing market dynamics in the short and long term.

Refer to our stakeholders, natural capital and social and relationship capital for more information.

The development of new technologies, particularly AI, has accelerated exponentially. These technologies are driving efficiencies, increasing operational effectiveness and uncovering new opportunities or maximising current ones. AI can also help organisations lower their direct emissions by enhancing energy efficiencies and supporting employee productivity. In mining, AI-based geological exploration has been shown to reduce costs and significantly improve discovery success rates in some applications.

Consequently, organisations are mindful that a delay in AI adoption can result in a substantial competitive disadvantage. However, as adoption increases, cybersecurity and ethical use concerns rise, requiring organisations to carefully govern the use of AI and emerging technologies.

Refer to intellectual capital for more information.

Our markets

In 2025, global commodity markets were pressured by subdued economic activity, trade restrictions, high economic policy uncertainty and weather-related supply shocks. As a result, Brent crude oil prices trended lower, driven by trade policy tensions and concerns over excess supply, although occasional spikes occurred in response to geopolitical developments.

The gas market fluctuated due to strong European LNG demand, weak LNG imports from China and Japan, a limited response to South Korea’s coal restriction, lower oil prices, warmer-than-seasonal European weather and strong wind power generation.

Base metals rebounded amid resilient global demand, shifting trade policies and supply disruptions, especially in copper. Precious metals surged to record highs – led by gold and silver – with platinum also recording significant gains, supported by robust investment demand, geopolitical tensions and policy uncertainty.

Overall, Exxaro’s commodity markets delivered softer performances in 2025, with lower market annual average reference prices for both thermal coal and iron ore. Performance trends varied between the commodities throughout the year: thermal coal started relatively strong but lost momentum, while iron ore started under pressure and later strengthened. Specific market drivers are discussed in the respective commodity sections on the following pages.

API4 coal export price averaged US$89.53/t (2024: US$105.31/t)

The bearish thermal coal pricing trend from 2024 persisted into 2025. Key drivers included high stockpiles in South Africa’s key markets, lower gas prices, growth in renewables and increased nuclear energy generation.

In 2025, the thermal coal market and trading conditions in China and Indonesia – the main drivers of import demand – evolved. China addressed domestic oversupply through safety and anti-corruption measures and the expiration of existing mining quotas, easing domestic supply and strengthening domestic pricing. Indonesia relaxed its pricing regulations, with thermal coal miners no longer required to sell at a floor price, which increased Indonesian coal imports to China during the latter part of 2025.

In India, domestic steel producers faced competition from cheaper steel imports, dampening demand for South African coal. Indian coal production increased, largely supporting its power generation sector. Higher gas and nuclear power output in Japan, Korea, and Taiwan further reduced coal demand. This decline in demand caused Australian prices to fall to a four-year low of US$91.58 per tonne, further aggravated by the sluggish Chinese offtake.

In Europe, gas price fluctuations linked to Russia-Ukraine ceasefire negotiations marginally influenced coal markets. However, despite warm weather and strong renewable generation in Germany, consistent stock drawdowns led to lower inventories. The API4 index fell to just below US$80 per tonne in October 2025 – levels last seen in 2020 during the height of the COVID-19 pandemic. Trade tariffs and volatile pricing added to the prevailing uncertainty.

In South Africa’s Waterberg region, Eskom offtake declined due to operational constraints at its power stations. While domestic demand was steady, low export prices caused producers to redirect volumes to the domestic market, resulting in oversupply.

2025 was characterised by ample seaborne supply, albeit lower compared to 2024, with Indonesia, Colombia and Australia recording lower exports. Russian exports remained under pressure as sanctions, discounted pricing and acute rail constraints limited export flows into Asia. Market access was increasingly reliant on traders and eastbound rail logistics, eroding producer margins and accelerating the closure of high-cost coal mines. Low and negative profitability curtailed capex, which delayed mine development and infrastructure upgrades. As a result, while seaborne exports to China and India held steady, Russia’s share of global trade was exposed to downside risks.

In 2025, the iron ore market was impacted by broader economic and trade dynamics, including tariffs, slower economic growth, a fragmented global trading environment, subdued Chinese economic growth, a fragile Chinese property sector, limited global iron ore supply and lower inventories at Chinese ports. Global steel output was lower, largely driven by China, with the rest of the world remaining relatively flat. India sustained its growth momentum, in line with its GDP growth performance, with material growth in steel production.

During the third quarter of 2025, sintering restrictions aimed at improving air quality in North China’s Tangshan city supported demand for high‑grade ore. As a result, high‑grade ore premiums surged, driven by strong mill margins, sinter cuts and reduced high‑grade supply, before retracing as margins declined and mid and low‑grade fines proved more cost-effective. However, after the easing of the sintering restrictions in October 2025, steel mills’ demand for lump iron ore weakened, putting downward pressure on the lump premium.

Rising iron ore supply came back into focus with the commissioning of the Simandou operations – Africa’s largest greenfield integrated mine and infrastructure project in Guinea – in early November 2025. Following the commissioning and ramp-up, the infrastructure will support exports of up to 120 million tonnes per year of mined high‑grade iron ore from their mining concessions in southeast Guinea.

Continuous growth in iron ore supply and exports remains the key limiting factor for seaborne iron ore prices, affecting the performance of Exxaro’s SIOC investment.

Shifts in the global energy market centre on the movement towards renewable energy, balanced with existing fossil fuel sources and infrastructure for a stable energy mix. Electricity demand is increasing, especially in light of the energy-intensive requirements of AI and cloud technologies. As inflation slows and central banks lower their interest rates, renewable energy investments are becoming more attractive. Furthermore, major industrial and mining players are urgently looking to renewable energy supply to enhance competitiveness, creating a robust investment pipeline.

South Africa’s renewable energy landscape is seeing aggressive expansion, formalised by the 2025 approval of the South African Renewable Energy Masterplan and an updated Integrated Resource Plan 2025 (IRP) that envisions over 60GW of new utility-scale and distributed renewables by 2039. The National Energy Regulator of South Africa also approved measures that allow projects in the grid-constrained Eastern and Western Cape to unlock roughly 3.4GW of wind capacity by accepting limited curtailment in exchange for compensation. In light of changing market dynamics due to the liberalisation of the energy sector and increasing pressure from international trade regulations, the immediate focus for independent power producers lies in navigating new market platforms and meeting the private sector’s demand for rapid decarbonisation.

The global transition towards a low-carbon economy is fuelling ongoing demand for energy transition metals such as copper and manganese, which are crucial across the renewable energy value chain. Manganese, in particular, is gaining significance given its importance for steelmaking and green infrastructure. As demand shifts towards alternative energy sources, demand for battery-grade manganese is climbing rapidly. South Africa possesses approximately 80% of the world’s known manganese resources, uniquely positioning the country to take advantage of this trend.