Diversified miner South32 has warned Covid-19-induced congestions at the ports, and labour shortages are denting its operations, prompting a cut in full-year guidance for its Australian manganese production.
Australia is currently experiencing a surge in Covid-19 numbers, driven by the more transmissible Omicron variant, with the pandemic also prompting a worldwide container shortage and a shipping backlog in ports, notably in commodities-hungry China.
In a production update for its half-year to end-December, South32 cut its full-year guidance for Australian manganese by 9%, with Covid-19 restrictions affecting workforce availability, while wet weather conditions are also preventing stockpiles from being built up.
Labour issues also weighed on group metallurgical coal production, which fell 15% year on year to 2.76-million tonnes, even as energy prices surged due to improving demand and coal production challenges in China.
Metallurgical coal prices almost tripled year on year, while South32 also reported record pricing for Hillside Aluminium in Richards Bay, though it warned logistical issues caused an inventory buildup, which is expected to persist in the near term.
“Port congestion and tight global freight conditions continue to impact our supply chains, slowing the movement of inventory, most notably for our aluminium smelters in Southern Africa,” the group said on Monday.
SA miners battled in 2021 with continued load-shedding, port issues and challenges on Transnet's rail network, notably cable theft. This prompted the industry to estimate it lost out on more than R30bn in exports in 2021.
South32, a globally diversified mining and metals company, produces bauxite, alumina, aluminium, metallurgical coal, manganese, nickel, silver, lead and zinc at its operations in Australia, Southern Africa and South America.
The group was unbundled from BHP in 2015 and completed the sale of its SA coal assets to Seriti in 2021. In SA, South32 still operates manganese mines in the Northern Cape, while Hillside is the largest aluminium smelter in the southern hemisphere. It also owns the Mozal smelter in Mozambique.
The group kept its guidance for production of SA manganese unchanged, but said it will be monitoring market conditions as well as its use of higher-cost trucking.
Some of South32's other operations fared better, while global supply disruptions also played a role in lifting prices, notably for energy coal, which rose 248% year on year.
Hillside saw a 57% increase in prices year on year, while ore prices of SA manganese dipped 1%.
“We achieved a number of strong production results across our portfolio and realised significantly higher commodity prices in the December 2021 half year, lifting operating margins across the group,” CEO Graham Kerr said in a statement.
“We returned $316m (R4.6bn) to shareholders during the period through our on-market share buyback and the payment of ordinary and special dividends,” he said.
“Looking forward our shareholders are well positioned to benefit from stronger markets and production growth, with our capital management framework designed to reward owners as our financial performance improves.”
In morning trade South32's shares were 2.57% lower at R44.32, bringing its year-to-date losses to 5.7%. They have risen almost 40% over the past six months.
Update: January 24 2022
This article has been updated with additional information.
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