Transnet derailment costs coal exporters billions

COAL exporting companies will be counting at least R20 billion in opportunity cost as the two-and-a-half-week disruption in Transnet Freight Rail’s (TFR) North Corridor has significantly hampered the smooth transportation of their product to international markets.

This comes as TFR on Friday lifted the force majeure imposed on its North Corridor export coal line in KwaZulu-Natal, following the derailment of a train pulling 97 fully-laden wagons en route to Richards Bay earlier this month.

The derailment – which occurred between Bloubank and Nhlazatshe stations, near Ulundi – caused massive damage to infrastructure and rolling stock, necessitating closure of both lines.

The recovery operation was also derailed when Transnet withdrew its operational teams from site because of threats to their safety as a result of violent extortion efforts, allegedly by a local business forum.

This impacted the service from the mines to Richards Bay, hampering the performance of contractual obligations by Transnet and coal exporters.

Transnet spokesperson Thandeka Ngwenya said on Friday that a joint recovery operation between Transnet, the coal export industry, and other stakeholders, had worked round the clock to ensure the line was repaired. Both lines were back in operation on November 19.

“However, Transnet was not in a position to resume normal services at full capacity on the coal line because certain critical restoration works remain outstanding,” Ngwenya said.

“The recent assessment of the site indicates that the normal resumption of services on the coal line can be immediately phased in. Accordingly, the force majeure declared on November 10, 2022, was lifted today.”

TFR’s North Corridor comprises a diverse mix of line types between Ermelo-South and Richards Bay, which together feed both the domestic and export markets, including the heavy-haul coal, chrome, sulphur, titanium slag and other commodities to the Port of Richards Bay in KwaZulu Natal.

According to Thungela Resources, South Africa’s biggest exporter of high-quality, low-cost thermal coal, coal exports to Europe from a consortium of local producers that own the Richards Bay Coal Terminal have risen eight-fold in the first half of this year, from 500,000 tons in 2021.

But two weeks ago, the African Rail Industry Association (ARIA) warned that TFR’s volumes have dropped by 24% in just five years.

ARIA said the average monthly gross tons/km/locomotive KPI was showing a 33% drop in efficiency over five years, equating to 600 locomotives of inefficiency.

TFR’s operational inefficiencies have forced coal exporters to weigh up alternatives and use road transportation to move coal with trucks to the Port of Richards Bay.

The Minerals Council of South Africa said on Friday that coal miners were not currently exporting to their full capacity, and a rough calculation was that the coal industry was unable to rail coal worth about R5 billion due to the derailment.

Council spokesperson Allan Seccombe said this number, however, was offset by many coal mining companies resorting to trucks to transport coal to Richards Bay and to customers.

Seccombe said the council estimated coal deliveries to Richards Bay Coal Terminal would fall to about 50 million tons this year, compared to 58 million tons last year, because of disruptions on the railway line from crime, vandalism and locomotives out of service due to a lack of spares.

“With the derailment and the strike at Transnet, we now anticipate coal deliveries may not reach 50 million tons,” Seccombe said. “Last year, when coal delivered to Richards Bay had fallen to 58 million tons, we noted that this was the lowest levels since 1996, and far below the annual average of 72 million tons between 2015 and 2019.

“We estimate the opportunity cost of coal deliveries of 50 million tons to be R30 billion when deliveries are measured against target.”

– BUSINESS REPORT