Kumba and Sasol count the cost of SA’s rail constraints

Iron and coal deliveries slowed by rail bottlenecks plaguing Transnet

Kumba Iron Ore and Sasol joined a host of other mining groups in SA counting the costs of rail bottlenecks on the rail network, providing a reminder of one the biggest constraints holding the economy back.

In a production update on Thursday, Sasol, the world’s biggest maker of fuel from coal, said it was facing logistical issues that were delaying transport of coal from its main plant in Secunda to Richards Bay, home to Africa’s biggest coal export terminal.

Kumba Iron Ore, a division of global mining heavyweight Anglo American, said rail bottlenecks were holding up its premium steelmaking material at its Northern Cape mines so it may have to slow output. Comments from the two companies on

Thursday came days after Thungela Resources, an Anglo spinoff, said the cost to the industry of Transnet woes topped an estimated R30bn in lost foreign sales, raising fear that SA will lose out on another commodities boom at a time when a global energy crunch has led to a surge in demand for coal.

The railway was plagued this year by lack of capacity by Transnet, maintenance work and other problems. While ironore prices slid in recent months on Chinese curbs on steel output, coal rallied on strong demand for the fuel in the midst of a global energy crunch.

As part of President Cyril Ramaphosa’s economic reform agenda, private train operators should have access to SA’s stateowned rail network within three years.

The government in October 2020 unveiled an economic reconstruction and recovery plan that includes third-party access to Transnet’s 23,000km of railways, which make up about 85% of Africa’s rail.

Sasol said quarterly export sales were up 17% as record coal prices offset lower volumes Sasol said in a production update. The group hedged up to 80% of its exposure to export contracts to protect margins.

The group said on it was working with Transnet, along with the wider industry, to help normalise operations. External sales in the group’s chemicals business also benefited from higher prices, rising 44% in the first quarter, despite an 8% fall in volumes.

Sasol’s share price jumped 30% in the September quarter, and doubled so far in 2021, reflecting a remarkable turaround for the company whose fate was in doubt in early 2020 when the oil price collapsed and as it grappled with a hefty debt load.

Kumba spokesperson Sinah Phochana said the company had little choice but to curtail output.

“Although we have a comfortable level of stock at port, a significant portion of the stock is at the mines,” said Phochana.

With annual rail maintenance and a further build-up in inventories, “it is expected that we will need to slow down production”, she said. The rail challenges include equipment breakdowns, cancelled trains and shipping delays, while bad weather at ports hampered loading, Phochana said.

The main route for coal runs from mines to the Richards Bay terminal, which is essential to the coal industry supply chain. The iron ore line runs to the west coast port of Saldanha Bay.

Transnet did not immediately respond to an e-mailed request for comment.

Chinese demand for highgrade iron ore has made Kumba one of Anglo’s most profitable units.

SA brought in a total of R217bn ($15bn) from exports of coal and iron ore in 2020, according to data from Minerals Council SA.

A SIGNIFICANT PORTION OF THE STOCK IS AT THE MINES. IT IS EXPECTED THAT WE WILL NEED TO SLOW DOWN PRODUCTION

Sinah Phochana Kumba spokesperson