Challenges with exporting bulk commodities

Bulk exports declined by 2% in 2018 due to Transnet woes

The ports data from Transnet National Ports Authority showed a 2.0% decline in bulk commodity exports to 167.9 million tonnes (Mt), largely due to problems at the state-owned logistics entity, Transnet.

There were a series of derailments on the Sishen-Saldanha line in the early part of 2018, but on November 28 the most serious disruption was not Transnet’s responsibility.

The accident that caused a 12-day long interruption happened when an abnormal haulage truck carrying a large mechanical shovel that exceeded the height of the bridge collided with the railway bridge situated between Vredendal and Lutzville on the Hol River road. A total of seven ore trains use the railway line daily with a freight capacity of 41,000 tonnes of iron ore each, so a 12-day interruption results in a loss of close to 3.5 Mt.

There is normally a stockpile at Saldanha, but because of earlier disruptions, in December 2018 this only held seven days’ worth of ore rather than the more normal 14 days. The result was that bulk exports out of Saldanha plunged by 59.6% year-on-year (y/y) to only 2.1 Mt in December compared with a peak of 10.2 Mt set in January 2018 and a normal monthly volume around 5 Mt.

This meant that for the year, Saldanha bulk exports fell by 10.5% to 57.4 Mt. If the exceptional record tonnage in January is excluded, then there was a 19.7% plunge for the eleven months February to December compared with the same period a year ago. This contrasts with Rio Tinto’s Australian iron ore shipments increase of 2% in 2018 to 338.2 Mt.

Transnet’s woes were however not restricted to the Sishen-Saldanha line, as on December 20, 2018, Transnet had a 51-car derailment from a 200-car train on the Richards Bay-Mpumlanga coal line because criminals cut the railway line with a blowtorch near Richards Bay. This meant that bulk exports out of Richards Bay fell by 19.9% y/y in December to 9 Mt. Due to a strong first quarter, when bulk exports out of Richards Bay grew by 19.5% y/y, the full year result was still a 4.5% increase to 92.8 Mt.

Bulk exports out of other ports such as Durban and Port Elizabeth eased by 3.5% to 17.7 Mt due in part to the 23% drop in the maize crop, but this was offset by increases in other commodities such as sugar and manganese ore.

The Transnet woes were also reflected in the land transport data compiled by Statistics South Africa. This showed that tonnage transported by rail fell by 9.6% y/y in October, the eighth time in the past year that Transnet has shown a y/y decline.

It seems as if Transnet is as dysfunctional as Eskom, which is why private industry has switched to the more reliable road transport. This sector had a 13.2% y/y increase in October due to the problems at Transnet, the sixth time this past year that road transport has had a double-digit y/y increase.

This contribution to Finance Friday was made by

Helmo Preuss

Forecaster Ecosa cc

+27 79 773 2458

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