Sasol, which has taken a R1bn hit because of Transnet Freight Rail (TFR) weaknesses, is in discussions with the state rail and ports agency to take control of and maintain some specialised rail cars used to transport ammonia.
CEO Fleetwood Grobler told Business Times that Sasol is working with Transnet at Sasolburg and Secunda to achieve this.
“We have worked with them jointly to put more rolling stock under Sasol's watch, as well as assist with the maintenance of that rolling stock. These are ongoing discussions, but we are encouraged by the collaboration we've seen, and we've also seen improvement in the last months with respect to some of the other rail trajectories to Richards Bay or into the port of Durban.”
Sasol is the world's leading producer and supplier of ammonia, a chemical used in the production of fertiliser for the agricultural industry.
TFR's weaknesses and power cuts continue to have a knock-on effect on energy, mining and metals companies, which reported weaker results this week.
Grobler said rail constraints had a R1bn impact on Sasol’s Chemicals Africa business due to lost or delayed sales as a result of not being able to move products to the Richards Bay or Durban ports, and having to switch from rail to road during the year ended June.
“There are two components to that," he said. First, there were "the increased logistics costs that we had to incur by switching those products from rail to road. That was a substantial amount — about R700m ... that could have gone to the bottom line if we stuck to rail, or it was available.
“There was another R300m that was impacted. We could not move the product and wehad to forfeit the sale of products because we could not move [them] out of our factories to the markets. These two contributed over R1bn to the bottom line.”
The policy in which the state provides all infrastructure may not be the most sustainable model. Given there is a white paper on rail is encouraging, but deregulating a broken piece of infrastructure is not good enough
— Thungela Resources CEO July Ndlovu
Sasol reported that annual earnings before interest and tax had declined 65%, from R61.4bn in 2022 to R21.5bn for the year ended June 2023. It said performance was affected by a R35bn impairment at its Secunda facility, a softening Brent crude oil price and cost inflation.
Thungela Resources, the JSE-listed thermal coal producer, which released its half-year results for the six months to June, also blamed rail constraints for weaker performance.
CEO July Ndlovu said the company would have to resize its portfolio due to poor rail capacity and declining coal prices.
“In the event that prices remain depressed for a protracted period and rail performance does not improve, we may be required to consider further revisions to our portfolio”.
Ndlovu said TFR achieved an annualised run rate of 48-million tonnes per annum (MTPA) for the industry in the first half of 2023, a deterioration of 13% compared with the 55 MTPA run rate achieved in the first half of 2022. He added that TFR suffered two derailments in May 2023 which cost Thungela at least 340,000 tonnes in rail capacity.
“A consistently performing and well-managed bulk rail infrastructure remains critical to the coal mining industry and the South African economy.”
South Africa should seriously consider further liberalisation of the rail sector, Ndlovu said.
“The policy in which the state provides all infrastructure may not be the most sustainable model. Given there is a white paper on rail is encouraging, but deregulating a broken piece of infrastructure is not good enough,” he said.
South32, the JSE-listed, globally diversified mining and metals company which operates South Africa Manganese, said it expected to use higher-cost trucking to optimise sales volumes due to rail bottlenecks and is exploring energy alternatives for its Hillside smelters.
The group added that it is difficult to compete when companies cannot rail their products to port.
CEO Graham Kerr said the company was also worried about Transnet's plans to allocate more rail capacity to emerging miners.
“One of our concerns is the potential that we may lose 15% of our current rail allocation to junior or emerging miners. There are discussions with Transnet on what they need to do and also what they are looking at, which might allow for productivity on the line.”
Transnet introduced six emerging miners which, under its MECA III programme, have been allocated 25% of total available rail capacity for manganese. It said special terms of the current allocation of uncommitted tonnage under existing contracts allowed it to reallocate the whole or a portion of uncommitted tonnage, currently at 15%, to facilitate the entry of new players.
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.