South African bulk commodity producers such as coal, manganese and iron ore miners have been battling reduced port and rail performance under Transnet. Picture: Supplied
Although there have been some improvements in Transnet’s rail and port performance, this was unlikely to immediately set off big increases in production of commodities such as iron ore and manganese while Anglo Platinum was likely to benefit from its cost restructuring despite taking a knock in the year to December 2024.
South African bulk commodity producers such as coal, manganese and iron ore miners have been battling reduced port and rail performance under Transnet. This has forced the miners to scale down production as ore stockpiles ratchet up.
FNB wealth and investments head of investment research, Chantal Marx, told Business Report in an interview on Thursday that iron ore producers such as Kumba Iron Ore were also facing uncertainty to demand dynamics from less rosy Chinese growth dynamics.
The outlook for iron ore demand was “clouded by China growth concerns” although analysts expect the commodity to “see a pick-up in demand from increased and continued infrastructure investment globally” over the long term.
Positively, Kumba had a track record of receiving above benchmark prices for its iron ore, a trend that Marx expects to persist.
However, Kumba’s iron ore production would somewhat remain muzzled, mainly as a result of the South African logistics constraints affecting its operations.
“There has been some improvement on rail and port performance but not enough for the company to change its medium-term production outlook for the time being,” said Marx.
Kumba Iron Ore said rail performance deteriorated by 2% in 2024 despite the company’s efforts to work together “with government and Transnet to improve logistics” performance.
Resultantly, sales ended the year at 36.3 million tons.
Kumba Iron Ore and Anglo Platinum constituted headwinds for Anglo American in the full year to December 2024.
Anglo Platinum expects to report a plunge in earnings when it reports its financials next week. Its headline earnings for 2024 suffered from the impact of R3.5 billion in non-recurring costs “associated with recent operational and corporate restructurings” as well as losses from associates, it said recently.
“Restructuring is expensive and this will come through in the FY24 results for Amplats,” said Marx.
However, the restructuring and cost rationalisation would “ultimately lead to a more sustainable production profile and make the business more resilient to the natural cyclicality” in the PGM market.
Anglo American also expects to demerge Amplats this year. However, there “likely won’t be an outright sale to any one” entity. Over the last few months Anglo American has been selling down its stake in Amplats in the market – boosting its coffers in the process.
Amid the currently depressed prices for platinum group metals (PGM), Marx said demand/supply fundamentals for the commodity “favour stronger” pricing in the outlook. Nonetheless, “this has been the case for some time and prices have been struggling to find support and turn” meaningfully higher.
“Should pricing improve we could see a meaningful push higher for all sector players with the high-cost producers and the more indebted companies outperforming such as Sibanye-Stillwater and Impala Platinum.”
BUSINESS REPORT