Exxaro warns two millions tons in coal exports at risk amid Transnet railing problems

Some 2mt of Exxaro’s planned coal exports during 2021 are “at risk” because Transnet Freight Rail (TFR) is having problems railing the coal to the Richards Bay Coal Terminal (RBCT) according to Nombasa Tsengwa – head of Exxaro’s minerals business.

Tsengwa said the main problem being experienced by TFR involved the sourcing of spares for its locomotives after spares supply contracts were abruptly cancelled in the wake of “irregularities” at Transnet.

As a result she said the coal exporters had downgraded their estimate on total export volumes through the RBCT during 2021 to 73Mt from 76Mt although the RBCT in January set its official target for the year at 77mt.

Her comments follow on from those made by South32 COO Mike Fraser in February when he flagged possible coal export delays because of TFR’s underperformance and said South32 had held  “deep conversations” with TFR.

Fraser said at the time there not yet been an impact on exports but added, “if it continues longer we will see that pressure building”. He attributed the problems to heavy rain and the vandalisation of locomotives during the annual shut-down.

In January, when the RBCT presented its results for 2020, there was no mention of problems with TFR affecting throughput. The terminal set its throughput target for 2021 at 77Mt – despite only exporting 70.2Mt in 2020 –  with CEO Alan Waller commenting that the target was linked to the available capacity of TFR to rail the coal to Richards Bay.

But Exxaro has now reported that TFR was railing coal to Richards Bay at an average rate of only 1.3mt a week compared with the rate of about 1.7mt a week that it should be achieving.

According to Tsengwa,  “it became apparent that TFR was having problems with locomotive availability due to spares shortages.   After a long engagement with them they told us that,  because of what had happened at Transnet before,  the contracts that provided for spares had to be stopped because of the irregularities.

“They then had to stop certain of the locos so they could use spares from them. They are telling us it may take a year to correct this situation. That’s why we have said that 2mt of our exports may be at risk because TFR may not give us the full capacity that we require.”

Tsengwa added the situation had been compounded by other problems such as cable theft and community unrest hence the downgrade on estimated total industry exports through the RBCT for 2021 to 73mt.  She also warned the situation could become even more dire “if anything else happens.”

Exxaro boosted exports 12.2mt in 2020 from 9mt in 2019 despite the impact of the COVID19 pandemic and was looking to maintain exports at around 12mt this year but that forecast is now subject to the caveat over TFR’s ability to rail the coal.