Mining decries cost of Transnet derailment at key freight corridor

Blocked line has rendered Richards Bay Coal Terminal redundant all week

THE MINING sector faces its own crises worse than load shedding as Transnet’s Northern Corridor in KwaZulu-Natal remained clogged up near Ulundi after a 5 000 ton coal train derailed last week with the entity casting suspicion at the Ulundi Business Forum, which had a dramatic fallout with Transnet over contract demands.

Transnet said over the weekend the derailment came after the Ulundi Business Forum was invited to provide a list of all equipment and plant machinery that they are able to deploy to site as well as costings.

Transnet had contracted the Ulundi Business Forum for equipment to assist in the derailment recovery and the Forum insisted on direct contracts with Transnet over and above what they have with Industry.

“Transnet rejected this demand and the Forum resorted to violence, which included assault, blocking access roads and the discharging of a firearm.

“South African Police Service are on the scene and Transnet has also activated its security personnel as well as the Public Order Policing unit to the site,“it said.

The line, blocked since Tuesday, has rendered the Richards Bay Coal Terminal (RBCT) into redundancy all week as no cargo has come through for the export market.

Transnet has declared its sixth force majeure in 18 months over the derailment, essentially exempting itself from legal and financial ramifications of not providing the service expected by bulk exporters of minerals and produce.

“There is nothing coming through. There haven’t seen trains since last week, the line could be fixed by Monday or Tuesday, we are not sure,“a RBCT lookout said yesterday.

Mining output in South Africa has continued to drag, falling more than expected in September as the energy crisis and industrial action hampered productivity. Data from Statistics South Africa earlier this month showed that mining production shrank by 4.5% in September from a year.

The Minerals Council of South Africa warned last month that the deterioration of Transnet’s capacity in rail and ports has cost the mining industry R50 billion in lost opportunities in 2022 alone while the poor performance of rail, which is well below targets, cost bulk mineral exporters R35bn in lost revenue in 2021.

Minerals Council of South Africa spokesperson Alan Seccombe said at the weekend that the biggest concern was the impact on the export volumes, which outgoing chief executive Roger Baxter last month estimated to be at 50 million metric tons (Mt) per year against Transnet’s assertion of at least 60Mt.

“The derailment means Transnet is unlikely to reach its targets, which emphasises what the chief executive said at the Johannesburg Indaba even before the derailment and during the strike,” Seccombe said.

During a presentation to the Joburg Indaba last month Baxter said the RBCT had exported on average 72Mt a year from 2015 to 2019, but only managed 50Mt in 2021 – the lowest since 1996 – because of Transnet’s inability to rail the coal.

That cost the coal industry R16bn in lost export earnings measuring actual against target export volumes. Target RBCT exports for this year are 60Mt, but Baxter reckons the actual tonnage moved is likely to be around 50Mt representing an opportunity cost of R30bn measuring actual against target tonnages.

This number could be more than doubled to R63bn if the actual exports were measured against the coal line nameplate capacity of 78Mt per year.

According to reports, European demand for thermal coal is up 27% so far this year as European utilities replace Russian coal, while there has also been some switching by utilities from natural gas to coal.

In the fourth quarter this year, the share of South African coal exports going to Europe could be as high as 50% as South African coal producers switch to more expensive high calorific value (CV) coal from the low CV coal used by Indian and Pakistani consumers.

He said the opportunity cost for the exports, with coal selling at record prices of around R3 800 per ton were big losses being made by the industry, a statement collaborated by Energy Minister Gwede Mantashe in a Parliamentary debate on the Just Transition last week that coal prices had increased 700% since the Russia Ukraine war begun.

Baxter has warned that the situation facing South Africa’s commodity exporters was as severe as the country’s energy crisis, but it was not getting the same level of recognition because it was not in the public’s face like loadshedding.

“Energy is much more obvious because people can see the energy crisis we are facing. Stage four load shedding is in our faces every day.

“But how many people know that at the logistics level the performance is as bad as what it is at the energy level?”, he said.