Transnet to favour junior coal exporters

[miningmx.com] — JUNIOR coal miners are to get preferential treatment on coal exports through the allocation of additional railage capacity by Transnet Freight Rail (TFR) on the line to Richards Bay.

This was disclosed on Wednesday by Transet general manager Divyesh Kalan at the Coaltrans South Africa conference in Sandton.

It follows industry speculation first reported by Miningmx on May 13 that Transnet intended giving priority to junior black economic empowerment (BEE) coal companies at the expense of other members of the Richards Bay Coal Terminal (RBCT).

At the time, Transnet spokesperson Mboniso Sigonyela would not give a definitive answer but said: “Transnet is committed to providing capacity to emerging miners, in particular BEE players.’

Kalan told conference delegates today that “it’s not all doom and gloom for the junior miners. TFR is working on a strategy to unlock some capacity on the Richards Bay corridor, but I cannot share the details with you right now’.

Asked at question time whether this scheme meant other RBCT members would have their railage allocations cut to make more available to the juniors, Kalan replied: “That’s a good question. I am afraid I cannot say anything more at this stage.’

According to a coal industry source, TFR wants to allocate another 3 million tonnes (mt) per year of rail capacity to the junior miners on top of the current 4mt/year which is earmarked for them through the Quattro scheme.

“That has to come from the other RBCT members, and I understand discussions are under way between TFR and the RBCT members over this.’

The source added it was also believed that Transnet was negotiating to acquire the 3mt/year export allocation held by Eskom in terms of its participation in the Phase Five expansion of the terminal to a capacity of 91mt/year.

The Phase Five exporters are receiving a tiny fraction of their full allocations, and then only because the other RBCT members agreed to cutbacks in their own entitlements to allow this.

The bottom-line problem is the failure of TFR to provide the capacity to rail the coal. At present TFR cannot rail enough coal to meet the pre-Phase Five capacity of the terminal, which was 72mt/year.

According to Kalan, TFR is planning to be able to rail 81mt/year of coal to the RBCT by 2015/2016.

It’s worth pointing out that in October last year former Transnet acting CEO Chris Wells said the organisation was committed to reaching 81mt/year by 2014, so there appears to be some slippage.

In his presentation to the Coaltrans conference on Tuesday, RBCT CEO Raymond Chirwa said the RBCT’s throughput target had been cut to 63.4mt for calendar 2011 from prior estimates of 70mt and 68mt because of the railage problems.

But Kalan on Wednesday maintained that TFR had “turned the corner in 2010/2011, even though there are still some cynics who do not accept this”.

TFR annual railage numbers are not directly comparable with those of the RBCT because TFR works on a financial year to end-March.

According to Kalan, TFR performed well in the year to end-March 2011 because it railed 64mt against a target of 67mt, losing 3mt to derailments and industrial action.

Kalan said TFR planned to rail 73mt in its current financial year to end-March 2012 and would do so by restoring railage rates to an average of 1.6mt a week – equivalent to 6.4mt a month.

Clearly, Chirwa does not believe that is going to happen and the opinion of the coal industry source on Kalan’s forecast is that “it’s a pipedream’.

TFR came close to the 6.4mt/month target in just two months out of the last 12, when it railed 6mt in June 2010 followed by 6.1mt in September.

The monthly average railage volume by TFR to the RBCT for calendar 2010 was 5.2mt, while the monthly average for the period to end-May this year was 5.1mt.

For TFR to hit its stated target of railing 73mt in its financial year to end-March 2012, it has to consistently rail 6.3mt every month until then, including June.

June will be a poor month because the line was closed until June 11 for annual maintenance and Kalan told the conference it was taking time to ramp up the railages since it had reopened.

So that bumps up the requirement for the remaining nine months. Clearly, the sceptics have good reasons for their scepticism.

There’s usually some catch-up in the second half of the calendar year, but the feeling among some coal industry sources is the RBCT is likely to achieve exports of around 61mt this year.

That would drop exports back to what the RBCT achieved in 1999 which, in turn, matches the levels the terminal was exporting at in the late 1990s when its throughput capacity was 63mt before it was upgraded to 72mt in 1999.