Kumba Iron Ore and Sasol joined a host of other mining companies in SA counting the costs of rail bottlenecks on the country's rail network, offering a reminder of one the biggest constraints holding back the economy.
In a production update on Thursday, Sasol, the world’s biggest maker of fuel from coal, said it was facing logistical issues that were delaying the transportation of coal from its main plant in Secunda to Richards Bay — home to Africa’s biggest coal export terminal.
Kumba Iron Ore, a division of global mining heavyweight Anglo American, said its premium steelmaking material is being held up at mines in Northern Cape province because of rail bottlenecks, which may force it to slow output as stockpiles rise.
Comments from the two companies on Thursday came days after Thungela Resources, an Anglo spin-off,, raised fears that SA will lose out on another commodities boom at a time when a global energy crunch has led to a surge in demand for coal.
The railway has been plagued this year by a lack of capacity by Transnet, maintenance work and other problems. While iron ore prices have slid in recent months on Chinese curbs on steel output, coal rallied on strong demand for the fuel in the midst of a global energy crunch.
As part of President Cyril Ramaphosa economic reform agenda, private train operators should have access to SA’s state-owned rail network within three years. The government in October 2020 unveiled an economic reconstruction and recovery plan that includes third-party access to Transnet’s 23,000km of railways, which make up about 85% of Africa’s rail.
Still, Sasol said quarterly export sales were up 17% as record coal prices offset lower volumes Sasol said in a production update, with the group hedging up to 80% of its exposure to export contracts to protect margins.
Sasol said on it was working with Transnet, along with the wider industry, to help normalise operations.
External sales in the group’s chemicals business also benefited from higher prices, rising 44% in the first quarter, despite an 8% fall in volumes.
Sasol’s shares jumped 30% in the three months to end- September, and have doubled so far in 2021, reflecting a remarkable turnaround for the company whose fate was in doubt in early 2020 when the oil price collapsed and as it grappled with a hefty debt load.
Kumba’s spokesperson Sinah Phochana said the company had little choice but to curtail output.
“Although we have a comfortable level of stock at port, a significant portion of the stock is at the mines,” Kumba spokesperson Sinah Phochana said. With annual rail maintenance and a further build-up in inventories, “it is expected that we will need to slow down production”, she said.
The rail challenges include equipment breakdowns, cancelled trains and shipping delays, while bad weather at ports has hampered loading, Phochana said. The main route for coal runs from mines to the Richards Bay terminal, which is essential to the coal industry supply chain. The iron ore line runs to the west coast port of Saldanha Bay.
Transnet did not immediately respond to emailed request for comment.
Chinese demand for high-grade iron ore has made Kumba one of Anglo’s most profitable units.
SA brought in a total of R217bn ($15bn) from exports of coal and iron ore in 2020, according to data from Minerals Council SA. /With Bloomberg
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