Tharisa flags rail constraints
• SA’s fourth-largest chrome exporter has had to rely heavily on expensive road transport to harbours because of difficulties with Transnet Freight Rail
SA’s fourth-largest chrome exporter, Tharisa, has had to rely heavily on road transport to move bulk commodity because of constraints caused by the state-owned railway operator Transnet Freight Rail. Tharisa normally sends 70% of its 1.5-million tonnes of annual chrome exports by rail, with the balance moved on road. In the March quarter, however, this split was even.
SA’s fourth-largest chrome exporter, Tharisa, has had to rely heavily on road transport to move bulk commodity because of constraints caused by the state-owned railway operator Transnet Freight Rail.
Tharisa normally sends 70% of its 1.5-million tonnes of annual chrome exports by rail with the balance moved on road. In the March quarter, however, this split was even because of weather-induced constraints on the railway line from Tharisa’s opencast mine near Brits to the bulk harbour at Richards Bay.
The chrome joint venture of Glencore-Merafe Resources and coal producers have complained that Transnet is increasingly finding it difficult to provide full, unconstrained rail logistics for export markets.
The cost of road transport adds an extra dollar to Tharisa’s cost of moving a tonne of chrome to either Richards Bay or Durban, which becomes a large number when half the company’s production is transported by road.
Transnet has said it is struggling with extensive theft and vandalism of its infrastructure with copper and other metals being targeted. Operators using the railway line have also noted difficulties with the locomotive fleet serving Richards Bay.
In the March quarter, Tharisa produced 358,400 tonnes of chrome, taking its interim chrome output in its 2021 financial year to end-September to 731,000 tonnes.
Tharisa is on track to meet its full-year production target of 1.45-million to 1.55-million tonnes of chrome despite disruption of the March quarter from heavy rains and intense lightning storms over its mine, CEO Phoevos Pouroulis said.
The company will generate 155,000oz to 165,000oz of the six metals that make up the platinum group metals (PGMs) at its Brits mine group in spite of a dip in March quarter output.
Tharisa is the world’s largest source of chemical-grade chrome or speciality-grade chrome and nearly a quarter of its chrome output is this premium material, which generally fetches $30/tonne more than metallurgical chrome. Metallurgical chrome is used to make stainless steel; the biggest maker of the metal is China. Speciality chrome is used in various chemical processes and products.
In the March quarter, production of speciality-grade chrome was 85,600 tonnes compared to 93,800 tonnes in the December quarter.
Tharisa realised $155/tonne for its metallurgical grade chrome, the bulk of its production, which was 14% higher than the previous quarter and one fifth higher than a year earlier.
“Stainless steel production and demand, and hence chrome demand, were at higher levels in China,” Pouroulis said.
“Power and emission controls curtailed production of ferrochrome, most notably in Inner Mongolia. This resulted in a deficit of ferrochrome and a rally in the price,” he said, adding that there was a similar increase in chrome ore prices.
SA is the largest source of chrome ore for China, which has overtaken it as the largest maker of ferrochrome, the ingredient fed into stainless steel mills.
SA’s ferrochrome producers, most notably Glencore, are pushing for a tariff on SA’s chrome ore exports to underpin the domestic industry, which has become uncompetitive compared to China because of a rapid rise in electricity tariffs that have increased more than seven times since 2008.
No decision on the imposition or scale of the proposed tariff has yet come from the government despite a cabinet endorsement of such a tax earlier this year.
Tharisa’s financial position in the March quarter was further bolstered by PGM prices, which were up by 37% compared to the December quarter and nearly 81% higher than the same period a year earlier.
Tharisa ended March with net cash of $31m (R452m), with cash of $73m and debt of $42m. Cash grew from $50m at the end of December and debt fell from $45m.
OPERATORS ALSO NOTE DIFFICULTIES WITH THE LOCOMOTIVE FLEET