Richards Bay goes for 72 million tonnes

[miningmx.com] – South Africa’s major coal export facility – the Richards Bay Coal Terminal (RBCT) – is targeting total exports of 72 million tonnes (mt) of coal for calendar 2014 but will only be able to achieve that through a huge effort during the month of December.

December export volumes are also likely to be boosted by an accounting convention employed at the terminal’s financial year-end through which volumes of coal actually exported during the first week of January in the following year can be included in the December total.

The accounting cut-off point for monthly exports during the first 11 months of the year is midnight on the last day of the month. Only ships still loading at midnight on that day are allowed to include their tonnages in the previous month’s total.

But for December, ships which have arrived before midnight on the last day – and are waiting outside the port to load coal – are allowed to include their cargoes as part of the December volumes even if they only complete loading during the first week of January.

Even with this convention the RBCT is going to have to pull out all the stops this month to hit the hoped-for 72mt which is three million tons below the original target set for the year of 75mt.

For once, Transnet Freight Rail (TFR) is not to blame for the shortfall because the state-owned utility has been consistently delivering coal throughout the year to Richards Bay at rates higher than the terminal has been able to export it.

Instead, coal exports were hammered by the power failure in February which shut down the terminal for 9 days and then the poor state of the export thermal coal market during the year with prices falling to levels where it became uneconomic for some higher-cost producers to export the coal.

“Collateral damage’ suffered by coal sector analysts and investors from the depressed coal markets came in the form of a decision by RBCT management in August to stop publishing monthly railage, shipping and stockpile information for terminal operations.

According to industry sources the decision was forced on the terminal by its shareholders because of concerns over the competitive/strategic nature of information regarding stockpile levels at the RBCT which had been rising as the coal market slowed down.

At the end of December last year RBCT stocks sat around 3.1mt but these had risen to 4.9mt by end July – the last month for which the terminal published official figures.

The original 75mt target was dropped to 73mt after the power failure caused by faults on both underground cables feeding electricity to the terminal on January 31.

Maintenance of those power lines is the responsibility of the uMhlathuze Municipality and the RBCT has never published an explanation of what exactly caused the double fault incident.

Estimates at the time were the RBCT lost exports of about 2mt worth about R1.8bn because of the loss of coal that could not be railed into the terminal for export.

The terminal was forced to temporarily declare force majeure on shipments as a lengthy queue of ships built up outside the port waiting to be loaded.

At the time RBCT finance GM Alan Waller said the terminal could catch up on the shipping backlog but commented, “tonnes lost on the railway line are lost forever.’

It seems the state of the coal market has taken another 1mt off the forecast annual throughput. According to industry sources the RBCT had loaded 63.3mt by end November.

The terminal has the installed capacity to shift 91mt a year – equivalent to about 7.6mt a month. The statistics archive shows the RBCT exported 6.8mt of coal in December last year but managed 8.1mt in December 2011 thanks – no doubt – to the extended year-end accounting cut-off point.

Shifting 7.6mt during the month of December would only boost the 2014 total to 70.9mt so – to meet its target – the RBCT will again be relying on the extended year-end deadline.

The RBCT exported 70.2mt of coal during 2013. The target for 2015 has not yet been set but is likely to be at least 75mt – and perhaps higher – thanks to the sustained improvement in railage performance by TFR.