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Transnet growth plans disappoint coal exporters Posted: Mon, 30 Jun 2008 [miningmx.com] --THE RICHARDS BAY Coal Terminal faces a long wait before it will be able to export at the full 91Mt/year capacity it will have installed from next year when the R1.1bn Phase Five expansion is completed. Presenting Transnet’s results for the year to end-March, CEO Maria Ramos said the organisation planned to increase the Richards Bay line’s coal capacity to 78Mt/year over the next five years. She said the current capacity on the coal line was 74Mt/year and the expansion formed part of the R42.1bn that Transnet had budgeted to invest in total on rail projects over the next five years of which 32% had already been spent. That is going to be highly disappointing for the country’s coal exporters who have been pushing for Transnet Freight Rail (TFR) - Transnet’s wholly-owned rail subsidiary - to increase its capacity on the Richards Bay line as fast as possible given booming export coal prices. These have reached as high as US$150/t FOB (free on board) Richards Bay in recent weeks meaning that every one million tons of coal that is not exported equates to lost revenues and foreign exchange equivalent to $150m (about R1.2bn). Asked about this Ramos replied that the expansion of capacity on the line above 78Mt/year was “work in progress” with the coal exporters. Chief financial officer Chris Wells confirmed that the capital budget at this stage provided only for expansion to 78Mt/year. “The next logical point is 81Mt. Negotiations are underway looking at possible expansions of capacity to between 81Mt/year and 91Mt/year but there are no commitments to do so. “It is possible we could expand capacity above 78Mt/year if we were to reach suitable agreements with the coal exporters.” Asked about the state of these negotiations Ramos replied, “ it is not my intention to conduct such negotiations in the press but we need to know that the coal export volumes are actually there. “We also need appropriate take or pay clauses in the contracts. Such expansion will also require an enormous amount of capital to be invested from our side.” The comments from Ramos and Wells contradict a number of statements made previously by TFR CEO Siyabonga Gama at the McCloskey SA Coal export conference held in Cape Town in January. A paper read out on Gama’s behalf stated that TFR already had the capacity in place to rail 78Mt/year of coal to Richards Bay. It also laid the blame for the glaring shortfalls in export volumes through the port with the coal exporters. According to Gama, the coal companies were to blame for 65% of lost railings volumes on the line which only shipped 65Mt to the port in calendar 2007. That is hotly disputed by the coal exporters. They maintain that - while there have been production shortfalls at various mines, in particular those run by BHP Billiton - it’s TFR which is largely to blame. Reasons are operating issues like train cancellations and derailments. Coal industry sources have also in the past disputed TFR’s capacity estimate of 78Mt/year. Ramos has now stated TFR’s coal capacity at 74Mt/year while Wells took a different stance on where the blame lies for lower railed volumes. He pointed out that coal volumes had declined by 5.2% in fiscal ’08 compared with fiscal ’07. Click Here to subscribe to our daily newsletter
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