Transnet Downgrades Coal Delivery Forecast Due to Thermal Coal Production Cutbacks.

Transnet, the South African logistics and transport utility, has downgraded its coal delivery forecast to Richards Bay Coal Terminal (RBCT) to a maximum of 73Mt for this financial year. South African Coal Report’s David McKay digs deeper.
Nov. 11, 2012 - PRLog -- At Transnet’s recent interim results presentation, Siyabonga Gama, CEO of Transnet Freight Rail (TFR), a division of Transnet, said that the coal delivery forecast to Richards Bay Coal Terminal (RBCT) has been downgraded to a maximum of 73Mt for this financial year. This compares to a previous forecast of at least 75Mt.  

“We are hoping against hope that 73Mt is possible,” said Gama. TFR achieved deliveries to RBCT of 68.6Mt in its 2011/12 financial year which has a March 31 year-end. Realistically, it expects no more than 68Mt in its financial year.

Gama said that poor prices for export thermal coal had resulted in a slowdown in coal production at the mines. He added, however, that TFR had increased its capacity on the coal line to as much as 78Mtpa.

“I’m not a miner of coals,” he said, adding that there had been cancellations of trains during the six months as mining companies were struggling to cope with export prices, some of which had fallen as low as $76/t, the lowest in over two years.

Bevan Jones, GM for London Commodity Brokers’ (LCB’s) Johannesburg office, said: “Although SA exporters are encouraged to rail as much of their production as possible by take-or-pay rail agreements, we are seeing a slowdown in mined tonnages and in some cases operations being put on hold entirely for now”.

Gama added: “We’ve got capacity to do more than 75Mtpa already. The problem is that prices have to be right for the mining guys. But we are hopeful of improved prices and there are two new mines that will be commissioned this year still.”

Transnet’s interim results presentation reported higher rail volumes for all products, but lower net profit as the strain of its R300B (US$34.6B) infrastructure spend program – known as the Market Demand Strategy (MDS) - began to show.

Total coal volumes for the six months were 7.8% higher at 41.6Mt, an improvement Transnet said was attributable to improved operational efficiencies following deployment of new locomotives and infrastructure maintenance in May and June. These volumes include deliveries to Eskom.

New locomotives for the export coal business – 112 Class 19E – would be put out to tender with 56 ordered for 2014 and another 56 locomotives in the following year, Transnet said.

A long-standing proposal of TFR is to more than double the rail capacity provided to newly emergent, black-owned business. Currently, access to RBCT is controlled by the terminal’s major shareholders except for some 4Mtpa which is administered through the so-called Quattro scheme.

Gama said the intention was to take this entitlement to 10Mtpa. “We think this should be made available. We have broached the subject with the mining houses and in-principle there is no violent disagreement. However, it must be done in the context of growing rail capacity,” Gama said.

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