GOING LOCO
The failure of Transnet Freight Rail and Eskom’s threat of stage 8 load-shedding have left South African mining companies fuming
Tempers are flaring big time in South Africa’s mining sector, with one coal executive describing the further deterioration in performance of Transnet Freight Rail (TFR) this year as “treasonous”.
“I’d go so far to say it,” he tells the FM. “Transnet is singularly failing in its critical inclusive growth mandate. Its performance is exclusionary and anticompetitive.”
While the high possibility of stage 8 load-shedding is shredding the national nerve, it’s the smash from a train coming the other way — or perhaps its absence — that poses an equally concerning threat to the mining sector.
All the major platinum group metal (PGM) producers who spoke to the FM say they have plans to manage loadshedding, even at the higher curtailment implied by stage 8. Even industry minnow Tharisa has enough diesel generation to keep its power-intensive crushers operating to the load curtailment equivalent of stage 6.
That’s not to say stage 8 loadshedding won’t bite the industry hard this winter. The Minerals Council
South Africa estimates stage 8 to equal 2,666MW in load curtailment
— or 27% of total mining sector electricity consumption, according to council deputy head of techno-economics Christian Teffo.
“This will result in further losses of production as some of our members stop operations to be able to drop the required load,” he told Daily Maverick last week.
The big caveat is that miners still have wriggle room — provided that stage 8 load-shedding is not prolonged.
But the industry has less flexibility when it comes to TFR, a division of Transnet. Road transport is limited and expensive, especially if certain commodity prices weaken, while alternative rail routes to other ports are mainly unfeasible.
One company executive tells the FM the decline in train availability is shocking to behold. “We used to see eight trains a week, now we get one a month,” he says.
Henk Langenhoven, senior economist at the Minerals Council, says: “It’s like Eskom — all the old sins are catching up on Transnet. If it’s not maintenance, then it’s personnel; if it’s not locos, then it’s wagons. Things break, fail, large and small — but, worse, it is completely unpredictable.”
Thungela Resources told shareholders in February it had budgeted for industry-wide annual coal deliveries of about 50Mt to Richards Bay Coal Terminal. That was the volume in 2022 — itself a 30-year low.
According to a market source, the tempo of coal deliveries after the first five months of the year is even lower than 50Mt. This is despite the Minerals
Council having agreed to set up teams consisting of member companies and TFR managers aimed at improving the quality of performance across chrome, iron ore, manganese and coal.
While it’s early days to expect significant results from its root-and-branch review of TFR processes, a derailment on May 11 near Vryheid involving 56 coal-laden wagons and locomotives is a big blow. It also throws into relief just how far the Minerals Council and TFR have to go.
“Fifty loaded wagons started rolling out of a siding — brakes not engaged — onto the main line to Richards Bay, into a loaded 100-wagon train pulled by four locos,” a source tells the FM. “Power [was] shut to stop the train, drivers [were] told to evacuate and wham: four locos on top of the crash, all near Broodsnyersplaas. Line closed without expected resumption date yet.”
Transnet is yet to provide an update on when coal deliveries will resume on the line.
As for Eskom, the mining sector watches and waits. Sibanye-Stillwater spokesperson James Wellsted says a significant increase in power curtailment is only likely for miners in the event of an imminent blackout. Generally speaking, however, mining industry consumption is critical. “It [Eskom] requires a baseload of demand to ensure grid stability which the high intensity users provide,” he says.
According to data published by the World Platinum Investment Council (WPIC) last week, first-quarter refined PGM supply from South
Africa fell 14% to 119,000oz — though only about half (65,000oz) was related to load curtailment. But the PGM industry estimates that a production fall of between 5% and 15% is “a good measure to use”, according to WPIC head of research Ed Sterck.
And what happens if stage 8 loadshedding becomes the new normal from June to August? Major production cuts, says Wilma Swarts, head of PGM analysis at UK-based precious metals consultancy Metals Focus.
“If stage 8 were to continue throughout the year, the production losses could easily escalate to around 320,000oz or more,” she says. “If the curtailment extends to underground activities, it would pose a far greater challenge to make up for the production losses within a year, if at all.”