Mining downturn could take the pressure off TFR

Manganese and iron ore mines

in the Northern Cape – which

are major exporters – are

busy laying off large numbers

of staff, slashing costs and

substantially trimming

production after the collapse in

commodity prices.

But, while this may be

disastrous news for mine

workers in the Sishen area,

which has no other jobs

available, it could be good

news for Transnet Freight

Rail (TFR) and Transnet Port

Terminals (TPT).

Iron ore prices fell about

35% in 2015 to prices less

than a quarter of their peak

in 2011 due to a supply glut

and growth concerns in top

consumer China.

Anglo American’s Kumba

Iron Ore CEO, Norman

Mbazima, said last July that

it was able to withstand iron

ore prices of US$45 per ton.

“If prices decline significantly

below that, we have to think

again about our business and

what to do about that,” he

added. But, by December 11,

ore prices had bottomed out at

$38.30, a record low in daily

prices going back to 2009,

Metal Bulletin data showed.

By last Friday, the futures

price was still below that

breakpoint, at $44.04,

according to barchart. And it is

expected to decline throughout

the year, falling to $35.22

by December; to $32.81 by

December 2017; and $32.04

by December 2018.

So that indicates at least

three years of loss-making

export prices

for SA’s iron ore

export mines.

To date,

this has forced

Kumba to

cut jobs and

restructure

its main mine

at Sishen. It

is currently

busy laying off

almost 4 000

in-house and

contractors’

workers –

and whispers around the

marketplace hint at lossmaking

global ore prices

possibly leading to the mine

being temporarily mothballed.

At the same time, about 620

jobs will be cut at the South32-

Anglo American manganese

joint venture (JV), also at

Sishen in the manganeserich

Kalahari Basin in the

Northern Cape – home to

80% of the world’s known

manganese ore resources.

And, while manganese

output will resume following

a suspension and strategic

review, this

will be at a

“substantially

reduced rate”,

taking about

900 000

tonnes out of

the market,

said a South32

statement.

Also, the

JV’s Metalloys

alloy plant

– one of the

largest smelters

in the world

– still has

three of its four high-carbon

ferromanganese furnaces

standing idle.

This will have enormous

impact on TPT and TFR

operations in the region –

which have concentrated

on bulk to the exclusion of

almost all else. But it may be

put to advantage, according

to a knowledgeable observer

of the freight industry.

Transnet reintroduced

manganese exports through

Saldanha Bay in January

2014 to make up for lower

iron ore volumes. It therefore

has the capacity to handle the

commodity.

Manganese ore exports

were being routed through

Port Elizabeth because the

rail line to Saldanha was

dedicated to iron ore during

the commodity boom.

In this case, the question

arises whether TFR needs

to go ahead with the

upgrade of the line from

Sishen to Port Elizabeth to

support projected growth in

manganese exports.

Also, planned upgrades to

the Ngqura-Sishen railway

line and a new manganese

terminal in Ngqura could

possibly be shelved without

any loss of revenue – which

would support the bottom

line.

The ore can rather go via

Saldanha in place of the

lost volume of iron ore – the

preferred route of the mining

companies.

At the same time, TPT

could still go ahead and

close down the now-aged

manganese terminal at

PE – something that would

please the city’s residents,

because every time there is

an east wind their curtains

are covered with black dust

from the terminal stockpile.

It would also fit in with TPT’s

plans to make PE exclusively a

car export and fishing port.

TPT could also backburner

its plans to go ahead with the

proposed costly move of the

Port Elizabeth manganese

terminal to Ngqura – which is

part of its development plans

to make Ngqura a container

transhipment and bulk export

port.

FTW put these queries

before both TFR and TPT, but

no response had been received

before time of writing.

INSERT

The ore can rather

go via Saldanha in

place of the lost

volume of iron ore

− the preferred

route of the mining

companies.

CAPTION

Sishen mine... iron ore prices fell 35% in 2015.