Kumba is the latest firm to be dragged down by Transnet

Date: Oct 22, 2021

Kumba Iron Ore was the latest company yesterday to flag concerns about Transnet’s rail and port challenges, which knocked its production guidance lower.

Petrochemicals company Sasol also said yesterday it was facing logistical challenges in transporting export coal due to Transnet Freight and Rail. Chrome and platinum group metals producer, Tharisa Minerals, said last week the South African inland logistics issues had led to longer supply chains and thus increased pricing for products.

Yesterday Kumba said it expected full year production and sales to be at the lower end of its guidance due to Transnet’s rail and port logistics performing below planned levels.

Kumba, a unit of Anglo American, said it would limit production in the months ahead to finish the year at the low end of the production guidance range at 40.5 million tons (Mt) due to higher stock levels at its mines.

It said strong production combined with Transnet rail performing below expected levels had resulted in materially higher levels of stock at the mines. It also expects its sales guidance to be at the lower end of the full year range at 39.5Mt.

The group said Transnet was carrying out a five-week refurbishment programme at Saldanha Port.

“Given some interruptions experienced, there is a risk of overruns to that period. As a result, the sales guidance is also expected to be at the low end of the full year range at 39.5Mt,” said the group.

Transnet is working to refurbish the iron-ore export line so that trains can travel at a higher average speed than the current 30km/h.

According to the PwC 2021 Mine Survey, as a result of Transnet’s underperformance many iron ore mines have been forced to investigate road-based logistics solutions. As a result, more than 323Mt was transported by road between January and June this year, compared to just 90Mt by rail.

Meanwhile, production during the quarter ended September increased to 10.8Mt, up 11% from 9.7Mt recorded a year ago.

Chief executive Themba Mkhwanazi said Kumba delivered a solid operational performance due to improved mining stability and good plant availability.

The group attributed the higher production to increased plant availability and reliability. Production at the Sishen mine increased by 14% to 7.5Mt during the September, quarter up from 6.6Mt in 2020, and the Kolomela recorded a 6% growth in production to 3.3Mt, up from 3.1 Mt a year earlier.

Kumba said equipment breakdown at Saldanha Port and weather disruptions affecting ship movements at the port led to lower sales of 10.1Mt from 11.1Mt last year.

In terms of the market, Kumba said while steel production cuts in China had weighed on iron ore prices in recent months, increased sales to markets outside of China had supported an average year to date realised price of $181 per wet metric tonne for the third quarter, 17.5% above the benchmark price.

“Overall, we are seeing ongoing market recognition for the premium quality properties of our iron ore products, including for their carbon emission reduction properties in the steel-making process,” said Kumba.



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