Miners and other exporters hope Transnet’s recovery plan will quickly boost its freight rail capacity after coal volumes hit a 30-year low and companies put a ceiling on production due to logistics pains.
At the Southern African Coal Conference in Cape Town under the shadow of the rail and ports crisis delegates called on Transnet to expedite its turnaround plan and appoint permanent leadership.
Speaking on the sidelines of the conference, Richards Bay Coal Terminal (RBCT) CEO Alan Waller said the terminal has moved severely low volumes of goods as a result of the logistics constraints, but he hoped the crisis has already peaked.
“I think it’s already a serious problem. We are 30%-35% down in volume. Even at current levels, you are starting to see an impact on the mining industry. We also can’t run mines when they can’t extract products and get them to the export market.
“I would like to believe that we can’t go down any lower than we are. I believe that with the initiatives that are in place now with Transnet, we have hopefully reached the bottom and we should turn the corner now,” he said.
Logistics problems have placed an outsize burden on the road network and other infrastructure and the economy cannot afford to have subdued rail capacity for much longer.
“I can’t speak on behalf of the mines, but I think the bottom line is the road infrastructure is saturated. The only opportunity is for rail to go up. If rail doesn’t go up and it goes down further, it is an inevitable solution that there has to be curtailment of production. Even with the best endeavours of the mines, that comes with the consequence of downscaling,” he said.
We do see an improvement this year. We are budgeting for an improvement
— Exxaro chief growth officer Richard Lilleike
Seriti CEO Mike Teke said the appointment of a permanent leadership at Transnet is urgent. “We hope that they will expedite that because we are taking the strain. We are not saying that they do not know what they are doing, but it would provide us a level of comfort to have someone in the position.”
Road Freight Association CEO Gavin Kelly said Transnet’s constraints have already driven collieries to put a low ceiling on their coal production.
“There are already some collieries who just cannot get their product out. That’s really, I suppose, one of the very reasons they’ve had this real push into the presidency.” At the Mining Indaba last year “mines, not just coal mines, stood up and said, ‘Hold on, there’s a big problem’”.
He said the rail constraints forced the ageing road network to take loads of truck traffic that it was never designed to withstand.
“These roads were built in the ’80s and ’70s. They have steep inclines. A lot of that is driven at slow speeds because of how they are designed. I say we have 18 months — and I don’t want to sound like a drama queen. We can’t give it to Sanral [South African National Road Agency Ltd]. That’s like expecting rail to work tomorrow,” he said.
Exxaro chief growth officer Richard Lilleike was more optimistic about mining exports, telling Business Times that the initiatives the government has introduced to turn Transnet around are likely to bear fruit.
“We do see an improvement this year. We are budgeting for an improvement. I think the work that we’re doing with government and other miners — we’re hoping that we have hit the bottom and are on the way back up,” he said.
Transnet Freight Rail (TFR) chief commercial officer Bonginkosi Mabaso said during the fourth quarter there was a return to stability and it was determined to consistently reach the 1-million tonne (Mt) per month mark.
“We are far from being out of the woods. We remain susceptible to vandalism. We lost 6.4Mt throughput in 2023/24. The key is the numbers lost are those lost after a rebate system. We measure at maximum theoretical capacity and then take our constraints into consideration,” he said.
TFR continues to seek a solution to an ill-fated locomotive supply deal with China’s CRRC, Mabaso said. In the meantime, Transnet is seeking to work with another original equipment manufacturer (OEM).
“While we manage the impasse with CRRC, we will go on a process to get another OEM to help us out. We are in the process of valuations and bids for partners to come in, study the locomotives, and re-engineer them,” he said.
There have been improvements on the coal line. “Those on the coal line will tell you that the last quarter of the calendar year, particularly December, has seen some consistency in terms of what we are delivering on the line.”
TFR north corridor acting managing executive Theo Johnson said only two of the six locomotives that Transnet is now using on the coal line have active compressors, when all six should ideally have them.
However, he was confident TFR could move 60Mt of coal for export 2024 as Transnet is working on incremental changes to the system.
“We took on this difficult journey of running the coal line in November. We looked at our distribution pattern and we have identified a bit of a gap in terms of how that is shaped. We are fixing that with the industry. Once we have finalised and have a well-balanced distribution pattern, we will have a good supply chain that is flexible,” he said.
Transnet acting group CEO Michelle Phillips said in a statement on Friday that TFR improved its rail volumes in the last quarter of 2023 as its recovery plan got under way.
“The quarterly performance rate of delivery to the RBCT increased from 47.10Mt in the third quarter to 48.74Mt in the fourth quarter.
“TFR’s North Corridor handles an estimated 41% of total TFR volumes and supports key commodity sectors including export coal and chrome.”
The statement said Transnet and RBCT signed a mutual co-operation agreement in November to fast-track maintenance. Transnet expects to have railed 49Mt of export coal to RBCT against a declared capacity of 60Mt for the financial year ending March 2024.
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