Coal export boost of 20% is ‘achievable’

Richards Bay Coal Terminal CEO says tougher cable theft measures should help company reach its 60Mt coal export target this year

Security is being beefed up on the railway line serving the Richards Bay Coal Terminal (RBCT) to fight cable theft, which together with a shortage of locomotives, a strike and a major derailment drove the terminal’s exports last year to the lowest in at least 30 years.

Presenting RBCT’s 2022 results on Thursday, CEO Alan Waller said 86 armed reaction units were now patrolling the coal export line at night and 36 drone teams were providing additional surveillance.

“The only technology that is being used at this stage is drone technology in terms of monitoring. Together with Transnet Freight Rail [TFR] we have tried to improve response times, so we have people in call centres. If there is a cut in a line, that is detected early and we can respond appropriately.”

The company, which handles 70% of the country’s coal exports, said volumes had plummeted to 50.4Mt in 2022, levels last seen in 1993 when the figure hit 51.3Mt. RBCT’s target for last year was 60Mt.

Minerals Council South Africa chief economist Henk Langenhoven estimated that the 10Mt gap in exports represented a loss of R30bn. The weighted average coal price for the 12 months to November 2022 was R2,973/t and world demand was at a peak due to the energy crisis in Europe.

“Only about 20% of the lost tonnages were due to cable theft and electricity disruptions on the coal rail corridor,” Langenhoven said. “The bulk of the explanation lies with inefficiencies on rail and in the ports.”

In December, Transnet and the Minerals Council announced a partnership to stabilise port and rail networks, whose deficiencies have sabotaged the potential of such bulk commodities as coal, chrome, iron ore and manganese. This was after the council wrote to the Transnet board calling for the dismissal of group CEO Portia Derby and TFR chief Siza Mzimela.

But RBCT, which sends coal mainly to Asia and Europe for such producers as Thungela Resources, Seriti and Glencore, believes the worst is behind it and it will meet the 60Mt target this year.

“Our budget is set at 60Mt and that is aligned to the Transnet contractual commitments with exporters. It could be a stretch, but it could be a possibility. We had the two big events that took place last year, and the hope will be that those do not take place again,” Waller said, referring to a 12-day Transnet strike and a major derailment at Ulundi in November.

He said copper theft had also been a significant problem last year.

TFR’s managing executive for its north corridor, Ali Motala, said for financial 2023 there was a 22% decrease in security-related incidents to 2,520 compared with the previous financial year. There was also a 33% reduction in the length of cable stolen, from 1,206km to 811km.

Motala said there had been “major anomalies” in the October-December quarter, which could not have been foreseen. These included the strike, load-shedding and the derailment.

The derailment of 97 wagons in Ulundi on the north corridor that serves Mpumalanga coal in November last year was significant. “The incident is by far an outlier in terms of scale and magnitude. It is not comparable to any other incident that we have seen on this line in the recent past,” he said.

Motala agreed with Waller that the target of a 20% increase in exports could be met this year, thanks to the efforts of industry and of the Transnet National Port Authority at Richards Bay to improve efficiencies.

“We continue all programmes Transnet has been busy with to improve locomotive supply and deal with the long-standing locomotives issue. All the locos that will come back to operation will help us to improve beyond 60Mt. With the resources we have now and with the operations management initiative, 60Mt is achievable.”

But Stephan Erasmus, an investment analyst at Anchor Capital, said he found it difficult to believe Transnet would raise its tonnage by 20%. “Despite the industry’s success in collaborating with TFR to reduce incidents and the effects of cable theft, railroads have been hit very hard in the past two weeks and have continued to see an increase in cable theft.”

Waller said it was in the national interest to improve rail capacity due to the significantly lower costs of hauling by rail compared with road.

“When considering trucking vs railing, at the highest level you are talking transport costs of $70/t (about R1,200) vs $11/t. That is a significant factor in the coal industry at large. The benefit that the industry, Transnet and the country have had since October 2021, when the coal prices started to go up, is that the impacts of lower volumes have been softened by high commodity prices.”

He said if the coal price dropped close to $120/t it would not be viable to move coal by road. About 16Mt a year of coal is now sent by truck to South African ports.

“There is 16Mt of coal that will not have a home, and 16Mt of coal will mean the closure of mines. To the average person out there it is a massive impact, it is going to have a dire impact on the economy and the viability of many of the mining operations out there.”

The incident is by far an outlier in terms of scale and magnitude. It is not comparable to any other incident that we have seen on this line in the recent past

Ali Motala

Managing executive for TFR’s north corridor