Kuseni Dlamini, Head Anglo American SA
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Richards Bay Coal falls short again
Brendan Ryan
Posted: Fri, 04 Jan 2008

[miningmx.com] -- WHILE the Richards Bay Coal Terminal (RBCT) now has the capacity to export 76 million tonnes (Mt) of coal annually the terminal’s actual throughput is still running way below what it should be doing.

The RBCT’s statistics for 2007 show the terminal came nowhere near its original target for the year and is actually marginally below the levels achieved during 2006.

The RBCT is putting the blame squarely on the former Spoornet - now called Transnet Freight Rail (TFR) - highlighting yet again the TFR’s inability to supply the terminal with sufficient coal along the Witbank to Richards Bay railway line.
We can but live in hope
According to RBCT chairman Kuseni Dlamini, the terminal received 64,7Mt of coal from TFR during 2007 which is 2,5% lower than the 66,35Mt which TFR railed during 2006.

The RBCT exported 66,12Mt during 2007 which it achieved by running down stockpiles at the terminal. Exports during 2006 amounted to 66,5Mt. The terminal did far better in 2005 when it exported 69,2Mt .

Stocks at RBCT stood at 1,2Mt at the end of December compared with 2,9Mt at the end of December 2006.

That means stocks are currently at a critically low operating level. At an annual throughput of 66Mt/year those stocks are equivalent to just under a week’s export volumes.

According to one industry source that’s far too tight for operating comfort because the coal companies run a high risk of incurring demurrage charges on vessels delayed by a shortage of coal while loading at the terminal.

“In one way, it’s fortunate that shipments through the RBCT have gotten off to a slow start this year and it looks like January and also February will be quiet months. On the other hand it is very difficult to catch up on those lost export volumes later in the year.”

That means the RBCT is likely to operate at levels well below its new 76Mt capacity during 2008 meaning exporters are losing out on selling coal at record levels currently around $95/t fob (free on board). Coal prices sat around the $40/t to $50/t level for much of 2005 and 2006.

The factors outside of the RBCT’s control that affected exports last year included a series of derailments on the railway line, a lightning strike on the TFR power station and bad weather conditions which resulted in a series of port closures, Dlamini said.

TFR also shut down the line for five days during December to carry out maintenance work. Dlamini says that accounts in part for current low stock levels. Industry sources say getting rail operations going again after the shutdown is proving difficult.

“They are battling to get moving again. There are 40 loaded trains parked along the line,” says a source.

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Dlamini adds a further increase in capacity at the terminal to 91Mt/year will become effective in the first half of 2009 when the current Phase Five expansion plan costing some R1,1bn is completed.

Particular bone of contention between the RBCT and TFR is that the RBCT invested in this expansion to allow greater access for black economic empowerment (BEE) coal exporters and non-RBCT members to the lucrative export market.

The RBCT had previously been accused of restricting such access and operating a closed shop for the benefit of its own members.

Yet, despite the R1,1bn expansion and restructuring of the terminal, BEE coal companies are still not benefiting because TFR has not invested fast enough in expanding its facilities to be able to rail the extra coal.

The RBCT had originally planned to export 75Mt of coal during 2007 of which 71Mt would be attributable to the shareholders of the terminal while 4Mt was earmarked for BEE users who are non-members.

Despite the on-going problems with TFR the RBCT has set the 2008 target at 76Mt with 4Mt once again earmarked for BEE non-members.

“We can but live in hope,” commented one industry executive when asked how realistic it was to set such a target.

The issue of a new general set of rail tariffs for use of the line remains unresolved some two years after negotiations started.

The main sticking point is that TFR wants the coal exporters to commit to “take or pay” contracts while the exporters want similar “take or pay” operating commitments from TFR.