Transnet wants longer coal deals

Johannesburg - South Africa's coal exports could reach and top 91 million tonnes a year (mtpa) but only if mining companies strike long-term deals with rail operator Transnet Freight Rail and reach the right tariff agreements, said Transnet CEO Siyabonga Gama.

One of the concerns about the expansion at Richards Bay Coal Terminal (RBCT) is TFR's ability to meet the rail requirements to shift 91 mtpa from the current 76 mt.

Gama said Transnet had to spend R40bn to increase rail capacity to 91mt, but this process was mired in talks with the sector to secure long-term production commitments.

"Some people are dragging their feet, which is not helpful for the industry," Gama said. "We've been in discussions for a very long time, and the doors aren't closed yet on getting firm commitments and contracts."

"There isn't any company that is going to make an investment of R40bn and upwards without those firm commitments. We need those contracts to take to the banks for them to hand us that money," he said at the McCloskey South African Coal Exports Conference.

He said the coal sector was already struggling to meet the rail current allocation of about 1.46 mt a week. The 91 mtpa exports would need rail loading of 1.75 mt a week.

New terminal needed

The first of the 110 locomotives Transnet has ordered will start arriving from July at a rate of six a month, allowing the TFR division to move 86mt, he said.

"I believe with the right structure of tariffs... the potential is greater than 91 million tonnes," Gama said.

A key factor in TFR's capacity growth plans is long-term agreements of 15 to 20 years with the miners, but at the moment none of them is longer than a year which is not favourable for planning expansions, he said. It costs R250m for a 100-wagon set and TFR has 65 of these.

"We cannot make commitments if the industry does not sign long-term agreements," Gama said.

The sector would have to look at a possible alternative terminal to the RBCT so that junior entrants to the sector could have unfettered access to the more lucrative export markets, he said.

RBCT chief operating officer Raymond Chirwa said the terminal could cope relatively easily with up to 110mtpa, but such an expansion would depend heavily on whether there was sustainable supply from the mines. In asking for export applications it received 10mt more than the 9mt on offer.

The 91mtpa capacity will be available from July 2009, he told delegates at the conference.

The trigger for looking at RBCT's expansion would be exports reaching a sustainable 86mtpa, he said.

Meanwhile, Gama said the seaborne thermal coal market of 700mt, which has grown by about 7% a year, will continue expanding but at a slower rate of 2.5% to 3% because of a slowdown in demand.

- Miningmx.com

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