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- Exports through the Richards Bay Coal Terminal last year hit their lowest levels since 1993.
- The low volumes delivered by Transnet Freight Rail continue to impact coal exporters.
- As coal prices drop, the impact of the railing problem will become even more devastating.
- For more financial news, go to the News24 Business front page.
Richards Bay Coal Terminal (RBCT) last year had its lowest exports in over three decades as Transnet's railing troubles persist.
RBCT, which is among the world's largest coal export terminals, reported export volumes of 50.3 million tons in 2022 – the lowest number recorded since 1993, when 50.9 million tons were exported. With a design capacity to export 91 million tons, RBCT reached record volumes in 2017 when exports hit 76.4 million tons.
"The biggest factor [affecting the terminal's performance] is the low volumes," said RBCT CEO Alan Waller. "And intrinsically linked to that is the ability to get the rail to the port."
The terminal, which is owned by South Africa's largest coal producers, is not designed to take road trucks, and even if it were, the number of trucks required to compensate for undelivered rail volumes is "pretty much unthinkable", he said.
Transnet's severe operational issues, which have intensified over the past two years, have severely impacted the terminal's performance.
The state-owned entity's rail division has been plagued by operational issues, cable theft and the unavailability of locomotives, causing railing volumes to plummet across the network and on the lucrative coal line in particular.
RBCT's performance was especially impacted in the fourth quarter of 2022 due to a 12-day Transnet strike and severe derailment, which affected the line for 10 days.
Budgeted volumes for 2023 are 60 million tons, in line with the volumes contracted with Transnet. "However, where we sit right at the moment, we have been hit very badly in the last two weeks, and there is certainly an increasing trend in terms of cable theft," said Waller, adding that industry and Transnet are looking closely at enhancing initiatives to tackle the issue.
Transnet's Freight Rail's Ali Motala – the managing executive of the coal line – said the state-owned company is on track to deliver budgeted volumes this year, despite the numerous challenges faced, as it works to implement various initiatives.
Industry and Transnet are working closely to try to resolve the ongoing issues affecting the rail line. For example, a collaboration to tackle cable theft yielded good results last year.
While high coal prices have softened the impacts of lower railing volumes, the matter will become even more dire if benchmark coal prices begin to head toward $100 a ton (down from $140 currently).
At current prices, coal exporters can still absorb the $70 per ton cost of trucking coal to alternative ports, compared with $11 per ton railed to RBCT. Waller estimates some 16 million tons are currently moving through alternative ports per year.
As prices come down, it will not be viable to move coal on the road. "And the impact of that to the economy as a whole is that there is 16 million tons of coal that won't have a home, and 16 million tons of coal would effectively mean the closure of mines at the end of the day," he said. "It's going have a dire impact on the South African economy and the viability of many of the mining operations out there."
Asia remained the largest export destination for South African coal in 2022, with 63% of volumes bound for India and Pakistan. Exports to Europe have ticked up, accounting for 28% of all volumes – and rising to 14 million tons in 2022 – up from 2.3 million tons in 2021 – as Russia's war in Ukraine spurred demand for coal in Western markets.
Of the 4 million tons export allocation which has been carved out for junior miners at the terminal, 3.36 million tons was utilised. This follows from the implementation of a volume incentive which has reduced costs for juniors by 20%.
