SOUTH32 said port congestion at Richards Bay had contributed towards a $275m working capital build at the midpoint of its 2024 financial year.
Commenting in its second quarter and half year production report on Monday, South32 said the port congestion was due to the timing of shipments from Hillside Aluminium. “We expect to complete additional shipments from Hillside Aluminium and drawdown our aluminium inventory to normalised levels during the March 2024 quarter,” the group said.
Aluminium sales decreased by 8% in the December quarter as three shipments totalling approximately 40,000 tons were delayed to January 2024, the group said. At 327,000 tons, half year sales from Hillside were three percent lower year-on-year.
The Richards Bay port as long struggled with capacity problems, largely owing to difficulties at the state-owned Transnet, a rail and ports company. In December, Transnet stopped trucks carrying coal to its Richards Bay terminal after reporting unprecedented traffic. By January, the situation was known to have eased.
South32 described its second production quarter as “mixed”. Zinc and nickel output increased a fifth, and silver production was higher, but production guidance was reduced at Brazil Alumina, Mozal Aluminium and at Sierra Gorda where molybdenum output was also reduced.
The outcome as a whole was a 3% reduction in group copper equivalent production guidance for the 2024 financial year ended June 30. Shares in South32 were 2% lower in Johannesburg on Monday and fell 2.75% on the Australian Securities Exchange. On a one year basis, the share is 32% lower.
Graham Kerr, CEO of South32 forecast a 7% improvement in production and cost controls that would “capture higher margins” in the second half of the year. Critically, he said some commodity prices would strengthen.
Aluminiumn prices ex-Hillside have fallen 9% in the last year while manganese prices from South32’s Northern Cape operations are 15% lower. Prices from metal produced by South32’s Mozal Aluminium in Mozambique is also lower, compounded by below specification production for 60% of metal in the second quarter, attracting lower prices.
South32 said that metal quality was expected to “progressively improve to LME-grade quality during the June 2024 half year”.
Mozal Aluminium is rebuilding production in terms of a recovery plan after a fatal injury. Crane availability was reduced as part of this work which resulted in some 73 pots being taken offline. As a result production guidance from Mozal Aluminium was reduced 12% to 320,000 tons for the year.
Manganese ore guidance has been maintained subject to continued trucking of material from its operations to Richards Bay. Trucking ore is more expensive than rail but South Africa’s Transnet is struggling to provide sufficient wagons.
