SA is missing out on the benefits of high commodity prices because of rail, port and border inefficiency.
From January to April, SA’s exported bulk mineral tonnages fell to their lowest level since the Covid-19 lockdown in the first half of 2020, says the Minerals Council SA.
Poor performance and degradation of rail and port infrastructure has seen SA’s coal exports drop 20% from about 80-million tonnes in 2017 to about 64-million tonnes in 2021.
According to African mining sector research specialist Afriforesight, SA’s coal exports fell even further in the first four months of the year, down 1.9% on the matching period in 2021 at 20.6-million tonnes.
The opportunity loss was compounded by rises in commodity prices.
As previously reported by Business Day, thermal coal prices were at a multiyear high, having more than tripled in the past year due to the combination of high demand from countries emerging from Covid-19 lockdowns and the supply crunch caused by major coal supplier Russia’s invasion of Ukraine.
The Richards Bay thermal coal price for high-grade coal, a benchmark price for export coal, was about $300 a tonne in April after falling from a high of about $450 a tonne in March, but still significantly above prices a year ago when coal traded at $100 a tonne, said Afriforesight.
Constraints on exports of coal, chrome, iron ore and manganese are a continuation of the difficulties that mining companies and traders had in 2021, when they experienced an opportunity cost of R35bn if delivered tonnages are measured against targets set by Transnet, and a R50bn opportunity cost if deliveries are measured against the capacity of the rail and port infrastructure and rolling stock, the council said in a statement.
“If there is no change or urgent intervention to address the logistical bottlenecks, the mining industry is likely to incur similar opportunity costs this year, if not surpassing historical losses,” said Henk Langenhoven, the council’s chief economist.
Bulk mineral exports in April were at their lowest monthly level since 2016 if the Covid-related economic shutdown from March 2020 is excluded.
Stats SA issued its April production and sales statistics for the mining sector last week, showing that the industry had its worst month in almost two years with a 14.9% year-on-year contraction.
After recovering from the disruption caused by the Covid-19 pandemic, mining contributed R481bn to GDP in 2021, up from R353bn the year before.
However, April’s drop was the worst since June 2020, when miners were battling with Covid-19 shutdowns.
According to Stats SA, platinum group metals output fell 22.6% year on year, contributing 5.8 percentage points of shrinkage, while coal production fell 14.7%, negatively contributing 3.8 percentage points.
In the four months to end-April, iron ore export volumes were 7% lower year on year, with the value of sales down 25%, said the council.
“The rail and port logistics bottlenecks are having a big effect on SA’s mineral exports. This worrying trend, which shows no signs of slowing or reversing, underscores the urgency for high-level intervention on the rail network and our ports to stabilise them,” said Langenhoven.
“Better commodity prices are compensating for underperforming export volumes but the price cycle may reverse or volumes may deteriorate to such a degree that it negates the price windfall.”
While the council’s leadership was engaged in high-level talks with Transnet on constraints it is dealing with, it also called for greater participation of the private sector in operating trains and port facilities to improve performance.
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