Commodities major Glencore, which has impaired R11bn in its SA coal business due to logistics constraints and low thermal coal prices, says it is “encouraged” by moves being made by Transnet’s new leadership team in turning the performance of the state-owned entity around.
In its interim results released on Wednesday, the group said a combination of subdued coal prices and logistical woes in SA, would impair $661m (R11bn) in the SA coal business — more than the $597m revenue the business raked in the period under review.
The group based in Switzerland said it produced 7.9-million tonnes of thermal coal in SA in the first six months of 2024, down 7% from the same time in 2023.
Glencore, worth nearly R1.3-trillion on the JSE, has been progressively cutting back on coal production in SA in response to export rail constraints. It said it would increase production rates “as and when additional rail capacity is restored”.
Group CEO Gary Nagle said the company was starting to see improvement in Transnet’s operation performance.
“On the logistics, certainly we are seeing an improvement in Transnet’s performance. They are still performing at levels we will like and what the rail capacity in theory is. There are some weeks where performance spikes up,” Nagle said.
“We are very encouraged by Transnet’s management who are collaborating with the private sector. We still see constraints but we definitely see green shoots and upsides.”
The coal industry, under the banner of the Richards Bay Coal Terminal (RBCT), has stepped in to provide financial assistance to cash-strapped Transnet to procure locomotive spare parts.
The lack of parts has hamstrung the performance of the rail, ports and pipelines operator over the past few years, costing the economy billions of rand and thousands of jobs.
Since 2019, Transnet has been struggling to get a service provider that can assist in supplying spare parts for some of the trains it bought in a controversial deal for 1,064 locomotives. It has about 200 locomotives that remain idle and cannot be returned to the railway lines as the Chinese Railway Rolling Stock Corporation (CRRC) refuses to provide it with spare parts.
RBCT is owned by more than 13 coal-mining houses, including subsidiaries of Glencore, South32, Sasol, Seriti, African Rainbow Minerals Coal and Exxaro Resources.
RBCT was established in 1976 with an original annual capacity of 12-million tonnes, and has expanded into an advanced 24-hour operation with a design capacity of more than 70-million tonnes a year.
RBCT and Transnet have entered into a co-operation agreement that allows for RBCT to buy spares on behalf of Transnet and for the costs to be recovered by RBCT’s shareholders.
Transnet told Business Day that since the advent of the recovery plan, which was approved in October 2023 during the 2023/24 financial year and ending March 31 2024, the entity has realised improved operational performance. It said total rail volumes increased by 6.7% year on year for the quarter ended June, while port container volumes increased 4.6%.
“The improved performance is attributable to a greater focus on operations across the business, improved deployment of resources, focused maintenance of equipment, more targeted incentives provided to operational staff and better alignment to the achievement of objectives and strategic initiatives set out in the recovery plan,” Transnet said.
“Although there remains a need for greater focus on execution in the future it is clear that the approach to the improvement in operational performance is already showing good results,” it said.
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