Trucking of coal reaches new high
• Industry calls for Transnet bailout • A third of exports sent by road
SA’s coal sector relied heavily on trucks to transport an estimated 26-million tonnes of the fuel to various ports for export in 2023, the highest level of road transport yet recorded, heightening pressure on the Treasury to pump money into state-owned transport monopoly Transnet.
The Minerals Council SA has called on the Treasury to take heed of Transnet’s request for a bailout to assist the troubled company in tackling its R130bn debt and implementing a turnaround plan.
The mining industry was hoping to recover from a tough 2023 in which record volumes of coal were transported by truck to ports for export because of a dramatic decline in volumes railed on the Transnet Freight Rail (TFR) coal line.
The industry experienced double-digit declines in mineral sales and exports last year due to port and rail constraints, steep falls in coal and platinum group metals prices, and record Eskom electricity supply disruptions.
One of the worst-hit commodities was coal, the price of which plunged 55% compared with average prices earned in 2022. It contributed to a 22% drop in coal sales, which is estimated to amount to R192bn for 2023, according to the Minerals Council.
Transnet’s financial and operational woes have put finance minister Enoch Godongwana in a balancing act. He has to weigh the competing demands of fiscal consolidation and public debt management with the negative consequences of Transnet’s poor performance on the economy, such as lower tax revenue, reduced exports and harm to SA’s image as a reliable trading partner.
Speaking at the Investing in African Mining Indaba, which got under way in Cape Town on Monday, Minerals Council SA chief economist Hugo Pienaar said coal export data for 2023 suggests about a third of coal exported was transported to ports via trucks rather than rail.
“In the coal sector, producers increasingly relied on road transport to move coal to harbours, including Maputo, which carries a cost premium compared to rail,” Pienaar said.
Coal exported through Richards Bay Coal Terminal (RBCT), a privately operated facility that handles most of SA’s coal exports, fell to 48-million tonnes in 2023, the lowest level since 1992 and down from the
76-million tonne peak in 2017.
Total coal exports for 2023 were expected to reach 73.7million tonnes, a slight recovery from 2022. Given that RBCT, which is served by the TFR coal line, only handled 48-million tonnes, trucks are estimated to have been used to transport about 26-million tonnes of coal to various ports during 2023, the highest level of road transport in the coal sector yet, said Pienaar.
Trucking is not the preferred option for exports of bulk com
modities because of the inefficiency compared with trains, the damage to roads, congestion, accidents, increased levels of exhaust and dust pollution, and severe disruptions for communities on routes between mines and ports, Pienaar said.
Transporting coal by road instead of rail is also much more expensive.
Speaking at the McCloskey Southern African Coal Conference in Cape Town on Friday, Alan Waller, CEO of RBCT, said transporting coal to port by rail costs about R230/tonne, but when trucked via road these costs can increase almost threefold to about R750/tonne.
At the same event, Gavin Kelly, CEO of the Road Freight
Association, said road infrastructure on those routes linking coal mines to ports, such as the N2 from Ermelo to Pongola (en route to Richards Bay and Durban), could not handle the tonnage that is being moved.
“If we continue using the roads we are now using, without real maintenance being done, we have about 18 months before we start seeing a real collapse of road infrastructure,” said Kelly.
According to Pienaar, the combination of lower commodity prices, electricity constraints and poor rail and port performance caused SA’s mineral sales (in nominal terms) to fall 13% for the first 10 months of 2023 compared with the same period in 2022.
Mineral sales are expected to post the first calendar year decline since 2015 and the largest annual fall since the financial crisis in 2009, the Minerals Council said. Mineral exports fell more than 11% and the mining sector’s direct contribution to GDP fell 12%, leading to the sector’s contribution to GDP dropping from 7.3% to 6.2%.
Pienaar said efforts to improve the performance of Eskom’s coal-fired power stations, as well as the effect of new private renewable energy generation projects coming online, should lead to an improvement in the severity and frequency of load-shedding within the next 12 to 18 months.
However, it might take longer to see significant improvement in rail and port logistics.
The Minerals Council hopes there will be some “hint” in the state of the nation address to be delivered by President Cyril Ramaphosa on Thursday to indicate that the state will provide Transnet with a capital injection via the fiscus to support the implementation of its turnaround plan. An announcement on this is expected when Godongwana tables the budget in parliament later this month.
Transnet’s turnaround plan will not succeed unless there is a taxpayer-funded bailout from Treasury, said Pienaar. He added that any support from Treasury to Transnet had to come with “realistic conditionalities”.
Transnet had said at the release of its financial results in October that it needed a R100bn bailout. In December, the Treasury provided it with a R47bn guarantee facility to support its recovery plan and to meet its debt obligations.
Transnet’s rail performance has been on a declining trend since 2017/18, when it was
moving 226.5-million tonnes of goods per year. This has since dropped to 150-million tonnes.
During the opening ceremony of the Mining Indaba, Ramaphosa said the energy crisis and port and rail bottlenecks are putting serious pressure on miners’ operational costs.
“As government, we are alive to the reality that without bold transformative reforms to the logistics sector, mining cannot flourish,” he said.
These reforms will include bringing in private partners, on a concession basis, on some of its lines. “By introducing competition in freight rail operations, while maintaining state ownership of the routes, we will unlock massive new investment in SA’s rail system,” Ramaphosa said.
TRANSPORTING COAL TO PORT BY RAIL COSTS ABOUT R230/TONNE, BUT BY ROAD THESE COSTS CAN INCREASE ALMOST THREEFOLD