Transnet rail woes contributed to loss of 9 million tons of coal - Exxaro

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Exxaro says it has come up with innovative ways to overcome challenges posed by Transnet Freight Rail to its value chains.
Exxaro says it has come up with innovative ways to overcome challenges posed by Transnet Freight Rail to its value chains.
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  • Exxaro says Transnet Freight Rail challenges put a strain on its ability to perform optimally.
  • Coal exports in the first half of 2021 decreased due to railing constraints.
  • Exxaro coal production and sales volumes were 12% and 10% lower in H1, compared to the first half of 2020.

As Transnet's key freight rail division continues to struggle, mining companies depending on it for transportation bear the brunt of its operational challenges.

Exxaro, which transports coal destined for export to the Richards Bay Coal Terminal by rail, said on Thursday that export sales in the first half of the year decreased by 1 821 kilotons (-31%), which it largely attributed to constraints experienced by Transnet Freight Rail (TFR).

These challenges ranged from inadequate locomotive availability, increased cases of cable theft, and vandalism of rail infrastructure.

The diversified coal producer said SA exporters had lost about nine million tons of coal exports during the first half of 2021 due to capacity constraints faced by TFR.

"The changes in product demand and TFR performance has put a strain on our ability to produce coal at optimal levels, putting pressure on our unit cost in the Mpumalanga region," it said.

Transnet holds a monopoly on the country's key freight rail infrastructure, and any bottlenecks in its value chain have a knock-on impact on operations of mining companies. 

Early last month, the state-owned logistics company reported that a train with 208 wagons carrying export coal to Richards Bay had derailed near Vryheid, KwaZulu-Natal, and 30 wagons went off the tracks. The incident, which led to a single line being operational during the clean-up and repair process, was the second major derailment in the current financial year.

Exxaro, which released its interim financial statements on Thursday, said rail challenges had compelled it  to come up with innovative ways to promptly respond to value chain interruptions. 

Despite this, Exxaro lifted headline earnings by 105% to R6.8 billion in the first half of the financial year, compared to R3.3 billion in the prior segment. The increase was mainly driven by an increase in equity-accounted income from the Sishen Iron Ore Company, due to high iron ore export prices.

Exxaro owns a 21% share in the Sishen Iron Ore Company.

While coal production and sales volumes were 12% and 10% lower, compared to the first half of 2020, a 47% hike in the average benchmark export price helped the company offset the impact of the Covid-19 pandemic and TFR challenges. All mines railed lower volumes compared to the first half of 2020.

Last month, Kumba Iron Ore lowered its full-year sales guidance by one million tons, citing rail constraints linking its mines to Saldanha harbour and adverse weather at the beginning of the year.

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