Chronic issues on the Transnet rail lines are expected to affect impact Exxaro’s export volumes by two-million tonnes, translating to potentially a couple of billion rand in lost revenue.
Ahead of its half-year financial close, Exxaro on Tuesday warned that coal production and sales volumes were expected to decrease by 11% and 9%, respectively, for the six months ended June 2021. That would be mainly due to continued problems on the Transnet Freight Rail (TFR) line that transports coal from its Limpopo and Mpumalanga operations down to Richards Bay for export.
“Generally, internationally, we as a supplier into the market see good demand; we see very good pricing,” Sakkie Swanepoel, Exxaro group manager of marketing, said on Tuesday.
“Unfortunately ... we do not see the logistics currently to support the SA export drive into this very ideal export situation for the country. And it is actually very sad that the country is losing out on this boom in the commodity market.”
Continue locomotive issues, rampant vandalism and cable theft and derailments on the rail lines have been a crippling problem for exporters of coal and other commodities at a time when global commodity prices are booming. In coal, the benchmark API4 price topped $100 (R1,431) a tonne in May — the first time it has reached such levels in three years.
Swanepoel said the problems were so severe that there were instances where a train would be unable to move from a specific mine for as many as three days.
Coal exports are among the largest foreign-exchange earners for SA. For Exxaro the inability to rail its product to the port has resulted in a plunge in export volumes. For the full year, Exxaro said it expected the effect on its exports to be at least two-million tonnes.
At an assumed average price of $75 and $95 per tonne of export coal of varied grade, the lost income at current exchange rates could be over R2bn for Exxaro, which last year generated R27.8bn in revenue when coal prices were low and the rand was significantly weaker.
The local market too was affected by the logistical challenges posed by Transnet. “We had seen that customers had no choice other than to tuck coal up from our Grootegeluk mine in Limpopo down to their plant ... that also definitely impacted then on the offtake,” said Swanepoel.
Even so, Exxaro’s domestic sales were bumped up 17% as a result of diverting tonnes intended for export into the local market.
While Transnet may soon be able to restore its operational capacity, Swanepoel said the cable theft on the rail lines was a result of the socioeconomic realities of SA and was not something that would change overnight and required a larger effort at a national level.
Transnet Freight Rail, meanwhile, will embark on its annual planned maintenance shutdown in the third week of July, after which it has committed to ramp up its shipments to the Richards Bay Coal Terminal.
To a far lesser extent, Exxaro operations were affected by irregular rains and mass testing of staff following the December and April holidays.
Exxaro has now vaccinated 100% of its healthcare workers and have commenced with the vaccination of employees over 60 years of age. The Grootegeluk and Matla occupational health centres have been registered and approved as primary vaccination sites with the national department of health having started the procurement of vaccines for the inoculation of Exxaro employees.
Exxaro will report its interim results on August 12.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.