16 April 2024
In this audio interview, Mbahupu Hippy Tjivikua, CEO of Namibia's Walvis Bay Corridor Group, provides an update on the Trans Kalahari rail line, a key project for the regional coal sector that he hopes can start construction within two years.
Transcript:
Hlengiwe: Hello and welcome to the African Mining Wrap, brought to you by McCloskey by OPIS, a Dow Jones Company.
My name is Hlengiwe Motaung. Today, we will take a look at some port and rail developments in Southern Africa, particularly Namibia.
Rich in veins of lithium, copper and uranium, Namibia is a nation quietly sculpting an important role in the global energy transition. But more so, Namibia has been an efficient catalyst in exporting coal from Botswana and some manganese from South Africa, and other minerals from the SADC region through The Walvis Bay Corridor.
By the end of 2023, The Walvis Bay Corridor achieved record import and export volumes of over 2.4 million tonnes, a 50% increase compared to the previous year's 1.6 million tonnes. To tell us more about the corridor, we joined by the CEO Mbahupu Hippy Tjivikua.
Mbahupu, welcome and thanks for joining us.
Mbahupu: Thank you, Hlengiwe. It’s a pleasure to be with you this afternoon, joining from Namibia.
Hlengiwe: I think I’m going to start with a two-part question. How did the Corridor manage to achieve this milestone in 2023, from 1.6 million tonnes to 2.4 million tonnes? And what competitive advantage does the corridor possess within the SADC region?
Mbahupu: We came up with strategies to basically intensify our business development, more so trade facilitation.
So, basically our core business is two-fold. One is business development, and the other is trade facilitation.
So, with business development, we’ve put up some targets on an annual basis as to what we want to achieve in terms of cargo that is being moved for every individual market.
And secondly, with trade facilitation is that we address the non-barrier issues. These are the impairments to trade, and they are also a cost in themselves if they are not addressed.
So, basically, we want to have the fastest turnaround times from pit to port, when a truck is moving from the mine to the port. Or from the mine going to deliver cargo anywhere to have more efficient routes.
We also put up strategic plans in terms of our infrastructure.
Looking at our road infrastructure for Namibia, they have been recorded for many consecutive years now as the best in Africa. So we do invest and also maintain and upgrade the current road infrastructure because these are arteries of trade.
We also looked at how we can make our port much more efficient. So we reclaimed land of 40 hectares from the ocean where we built a new container terminal. That container terminal is also for us to increase in terms of the cargo volumes or the container traffic either for Namibia’s own consumption or export.
So, when we created the new container terminal 5 years ago in the Port of Walvis Bay, it opened up space where the old container terminal used to be so we can handle break-bulk cargo.
We are also looking at a new area that we have identified that we are busy developing, north of the Port of Walvis Bay just a few kilometres. Basically also to expand in terms of port capacity.
I think our success lies in the fact that we are a public-private partnership. So we do take the public and the private sector together to do this initiative. So this is not done in isolation only by the public sector. And it is also a matter of leadership as well. We take very bold leadership to implement these projects.
Hlengiwe: Since you’ve achieved the 2.4 million tonnes in 2023, what are the anticipated cargo volume for the year 2024?
Mbahupu: We are a little bit conservative. We don’t want to put higher targets at this moment.
We want to create more efficiencies. I think the efficiencies can come when we remove the non-tariff barriers because these can cause a lot of discomfort with investors.
We anticipate more volumes. I think when we have got more interconnectivity.
The port at this moment is not fully utilised up to capacity, so we do have the capacity. We do talk to the markets, we frequently visit the markets and clients and we try to identify different commodities.
Hlengiwe: What quantity of coal was trucked through the Corridor in 2023?
Mbahupu: The coal throughput from Botswana was about 200 000 tonnes, and that was the first time we had done it.
At the moment the coal prices have gone down, and the demand also which significantly changes the boarding, but we are looking at other commodities, like in Northern Botswana there is a bigger project in the Tsodilo area in Shakawe, just south of Kivundu in Namibia where one of the biggest iron ore deposits is being discovered.
That project is in millions in terms of volumes of iron ore that can be exported. But at this moment, when we look at that picture, it is not sustainable on the road.
Hlengiwe: Talk about sustainability on road haulage. The Trans-Kalahari project, which is aimed at connecting Botswana and Namibia via rail, has once again gained momentum. Expressions of interest from about 12 contactors were announced in late 2023. Could you provide an update on that and what the next steps are?
Mbahupu: I think let’s give credit of the Trans Kalahari project to the leadership politically of Namibia and Botswana.
President Masisi in Botswana and the late President Hage Geingob, they are the ones giving importance to this because they said that the countries should be interconnected. That is a tall order but it is an executive order so we have to fast track it.
It is at a phase now where the expressions of interest were issued late last year, and the project office is currently busy negotiating with those that have been shortlisted to go to the next stage.
I don’t want to pre-empt the process at this moment, but it is positive in a sense that we are looking for the key players to come in lay the rail infrastructure that will connect Namibia to Botswana, all the way up to the Mmamabula area, where there is a lot of coal deposits.
It must be taken that the rail infrastructure connection between Namibia and Botswana is not merely for coal transportation, but for various minerals, so we are looking at the diversity of minerals and even the movement of people, so this is basically what we are looking at, but it looks positive.
We expect the construction and ground-breaking to be done hopefully within the next two years (2026).
Hlengiwe: This agreement between the two countries was signed in 2014 and has since been met with various obstacles. Can you expand on what those obstacles were and what do you think will make it successful this time around?
Mbahupu: I don’t like normally dwelling in the past, but all I can say is that we have better momentum right now. The leadership is there.
The support is there and the private sector is also playing a significant role in this regard.
I think in the past we have also been thinking that the governments of Namibia and Botswana must be the ones to fork out the money for this project but they have other competing priorities in terms of social responsibilities of housing, education, healthcare, public safety and some other infrastructure, so I think that the road that we have taken now is more of a business route where whoever wants to is going to be the best in the railways they will have a piece of mind in terms of their return on investments.
Hlengiwe: What could this mean for Botswana’s coal industry and where do we see the rail costs when compared to road hauling?
Mbahupu: Normally rail should not be more expensive than road. That is by design and operations, but because there is no rail connectivity, the road has been the dominant sector for the export of coal.
Road cost is extremely high, and sometimes this eats into the profits of the wholesale agreement of the coal.
On the other part, coal is also a commodity where we are getting a resistance from some of the countries where they feel like it’s a fossil fuel that creates pollution, but that is a different chapter of politics, I will not delve into that.
But yes, coal demand is there in the markets and we are there to facilitate hopefully at a much cost effective way.
Hlengiwe: Mbahupu, thank for much for joining us and all the best on your future work at the WBCG.
Mbahupu: Thank you very much, Hlengiwe.
Hlengiwe: Mbahupu Hippy Tjivikua, the CEO at the Walvis Bay Corridor Group. Anticipating more volumes for the corridor’s volumes this year, but also focusing on efficiency and of course outlining the construction timeline for the Trans-Kalahari project, which could massively unlock Botswana’s coal export potential.
Thank you for joining us on this instalment of the African Mining Wrap. For more information, do follow our LinkedIn page: McCloskey by OPIS, a Dow Jones Company. See you again in the next one.
09 April 2024
The High Court in Pretoria has sided with Richards Bay Minerals (RBM) over how to calculate the mineral royalty rate on the various minerals it produces.
Richards Bay Minerals (RBM), a mineral sands producer and local subsidiary of global mining giant Rio Tinto, took the South African Revenue Services (SARS) to court to seek a declaratory order relating to the interpretation of the Mineral and Petroleum Resources Royalty Act.
The dispute between RBM and SARS arose in 2018 over how to properly determine the miner’s mineral royalty liability on gross sales of unrefined product.
SARS contended that the royalty must be applied separately to each and every mineral contained within an unrefined product.
RBM, which produces titanium dioxide, pig iron, and zircon, argued the royalty has been, and should be, applied in an aggregated way, with one royalty rate to encompass all the minerals it produces.
In its ruling, the High Court sided with RBM’s interpretation and held that only one royalty rate need be calculated for all unrefined mineral resources produced by a miner.
The victory sets a precedent for the industry and is expected to have major implications for other miners which produce more than one mineral from their operations.
The decision clarifies the approach to calculating mineral royalties in a manner that could reduce the financial burden on companies that extract multiple types of mineral resources.
Global law firm ENS said in a note. “The judgment not only resolves the dispute at hand but also sets a precedent that will guide the calculation of mineral royalties in South Africa moving forward, ensuring a clearer and more equitable framework for both the mining industry and the government,” it said.
An executive in the ENS tax practice said the ruling makes a “huge difference” for RBM in monetary terms. The same could be true for other miners which extract and produce multiple minerals from their operations.
09 April 2024
Hlengiwe Motaung
Diversified South African miner African Rainbow Minerals has entered into a subscription agreement to purchase 15% of Canadian critical minerals company Surge Copper Corp for CAD3.8m ($2.8m).
In 2023, Chief Executive in the ferrous division, Andre Joubert, had stated the company's interest in the battery industry through supplying manganese sulphate sourced from slag produced by its ferromanganese smelters.
While plans for that are underway, the company has put its foot into battery minerals by subscribing for 39,608,708 common shares of Surge, through its subsidiary ARM Copper Company.
Surge is working on a copper project in British Columbia called Berg, with a mineral resource estimate including 23 mt of copper, as well as molybdenum, silver, and gold.
The deal is pending the acceptance by the TSX Venture Exchange and South African Reserve Bank approval.
02 April 2024
Hlengiwe Motaung
South Africa’s manganese producers are cutting back on trucking their supplies to ports due to low export prices and high transport costs.
Similar to South Africa’s coal industry, trucking is no longer a viable option for many manganese producers with prices at or below $3.00/dmtu for the past nine months. And with railings severely limited due to cable thefts and derailments, exporters have no choice but to reduce production.
African Rainbow Minerals (ARM) said last month it had stopped trucking ore to the port and significantly cut its production. Output at its Black Rock mine fell 17% on the year to 1.8 mt for the six months ending 31 December.
“We made a decision not to road ore,” said Andre Joubert, chief executive of ARM’s ferrous division. The company said trucking cost them ZAR1,000/t ($53), while railing to ports was much cheaper at ZAR250/t ($13).
ARM isn’t the only one cutting back on production, as the country’s overall manganese output in January tumbled 36% from a year ago to 1.3 mt.
Producers currently selling lower grade ore below 37% manganese content “will not survive or get any margins by trucking”, an industry source said.
This drop in demand is being felt throughout South Africa’s trucking industry, particularly those dependent on the route from the manganese rich Kalahari basin to the port of Port Elizabeth.
"There is a lot of pressure. We're seeing companies in that sector liquidating and auctioning their trucks," said a truck owner.
Collin Ramukhubathi, Afrimat’s executive director, said it was seeing a greater availability of trucks.
02 April 2024
Transnet shipments on South Africa’s main coal rail line rose to their highest weekly level for financial year 2023/24, with railings to the Richards Bay Coal Terminal (RBCT) at 1.18 mt.
Transnet’s North Corridor, which mainly transports coal for the domestic and export markets, railed a total of 1.41 mt last week, surpassing the previous FY2023/24 high reached in late June. Transnet’s current financial year ends on 31 March.
“Week 53 marks a definitive moment for the North Corridor,” said Theo Johnson, the corridor’s acting managing executive. “This milestone paves the way for the North Corridor to reclaim its former glory.”
If Transnet can maintain its current weekly rail rate of 1.18 mt to RBCT, the rail operator could reach its target of 60 mt in FY2024/25. However, the rail operator still struggles with cable theft, train derailments, labour issues and locomotive availability problems.
RBCT has set a conservative target of 50 mt for its coal exports this year, up marginally from its 30-year low of 47 mt in 2023, due to Transnet’s rail issues.
26 March 2024
In this audio interview, Brad Rogers, CEO of Jupiter Mines, shares insights into the company's ambitious 5-year strategy. We explore Jupiter Mines' vision to emerge as a supplier of high purity manganese sulphate monohydrate (HPMSM) to the lithium-ion battery industry outside of China. Discover how this Australian-listed miner plans to expand into the global battery metals market.
Transcript:
Hlengiwe: [00:00:14] Hello and welcome to the first episode of the McCloskey Manganese Wrap, brought to you by McCloskey by OPIS at Dow Jones Company. My name is Hlengiwe Motaung and today will take a look at the manganese market from the South African perspective. In the spotlight is Jupiter Mines. Jupiter has a 49.9% interest in one of South Africa's largest mines - the Tshipi Borwa manganese mine in the Kalahari Basin of the Northern Cape.
It is in fact one of the five largest manganese ore exporters globally, with current production at a run rate of between 3.3 and 3.5 million tonnes per year. The Tshipi mine has seen steady state production from 2014 and has since been a key player into the global steel industry.
But recently, Jupiter announced its plans to dedicate some of its manganese ore into the electric vehicle battery industry by producing the highly sought after high purity manganese sulphate monohydrate (HPMSM) that goes into lithium-ion batteries.
This was revealed recently on the company's five-year strategy update. To unpack this further, we are joined by Jupiter Mines CEO Brad Rogers. Brad, welcome and thanks for joining us.
Brad: Thank you for having me.
Hlengiwe: Firstly, before we get into the manganese sulphate update, let's take a look at Jupiter's performance. In March 2023, your ambition was to be the world's largest manganese producer by 2028. Can you give us an update on how this is progressing?
Brad: Yeah, thanks for the question. So, we're a year on from that strategy being released. It is a five-year strategy, as you said, and we've been working on all elements of that strategy since we released it.
The first part of the strategy is around efficiency. So how we improve costs and lower risks from an operating perspective - part of that is about logistics.
The second element is about getting to an optimal level of production. It's a very long life mine, it's open cast. You mentioned its current level of production. But for such a long life mine, open cast, we think some other work needs to be done there to determine if its production should be slightly higher than that. And we also have ambition to grow through consolidation in South Africa.
Thirdly, it's a sustainability strategy, which is something that the management team at Tshipi already do very well. And it's about Jupiter as a major investor in that mine telling that story and putting out a plan, aligned with Tshipi own plans, around what we're going to do next.
And then finally, the last element of it, we'll be talking about a bit more in a moment, about our battery grade market entry strategy. So very busy times over the last year. We're busy on all of those elements of the strategy with about four years left to go.
Hlengiwe: Certainly, a very busy time for you guys at Tshipi. And now to touch on your strategy update that you released recently, you highlight your efforts to produce high purity manganese sulphate. What is attracting you to the battery market?
Brad: Yeah. Great question. So, we've already got a really good business in Tshipi. And, mostly our growth strategy is about growing our exposure to manganese by doing more of what we are already doing.
This strategy to potentially enter the downstream market to produce battery grade manganese - we focused on for a few reasons.
One, we believe that there will be a market there, and that market for supply of HPMSM will be undersupplied for a period of time starting late this decade.
We also think that as a large existing miner with some relationships that we have at a shareholder level, POSCO is our third largest shareholder and POSCO will be a player on the buy side of this HPMSM market. And AMCI is our second largest shareholder, they are a significant investor in downstream battery processing markets in North America.
So, we think there's an opportunity there. We think the economics are potentially attractive. We think though we also have a few things going for us, which means that we're likely to be successful if we choose to take this step. It's a very new market.
So, what we're doing, as you would have seen in the announcement last week, is doing first principles where we're in planning stage, but we're interested in it because we think there's going to be a market shortage, and we think we're well poised to be able to assist in that regard.
Hlengiwe: Brad, there's a vast difference between the steel industry and the battery industry. And so I want to understand advantages that Jupiter has over others in the HPMSM market. What makes you stand out?
Brad: If you look at some of the companies that are looking into this space, separate to Jupiter, many of them have to develop a mine. And, that mine will be dedicated to supplying downstream, upgrading to HPMSM.
In Jupiter's case, we're invested in, as you mentioned, a very large operating long life mine. And we're looking to use what we at Tshipi call low grade ore - 32% manganese contained - in order to produce HPMSM. And that's the material that we've used for our testing to date.
And so, we're able to value upgrade the solid material that we're producing that isn't saleable through the steel cycle but is used and is suited to upgrading into battery grade manganese. So that's one of the advantages. In addition to, the scale we have relative to some of those parties, as well as the strategic relationships that I've just mentioned.
Hlengiwe: And in terms of pricing. I know you aim to be the most cost-efficient ex China supplier. How will you compete? And what price do you need to make this investment viable?
Brad: Yeah, that's a good question. But firstly, we're not too focused on the current price for HPMSM in China. And because the demand for HPMSM currently is very low.
There's about 200,000 tonnes of HPMSM, produced annually, and 98% of that is in China. And the prices are low right now because notwithstanding, the demand isn't that high. The supply is a bit higher.
So that's a market currently that's in oversupply. And the cost that you just mentioned is really to sustain the existing production, much of which is produced from electrolytic manganese metals (EMM).
But the demand that we're focused on - that is going to lead to an undersupply in this market. We can see through the work that we're doing top down through market strategy work. But also bottom up through discussions with vehicle manufacturers, through battery manufacturers really started pickup in about five-years’ time.
And so, we are of the view and it's a consensus view from most analysts, saying that HPMSM will see an increase in demand and supply will lag. And so that will create a shortage of supply.
And so, there'll be a period of time where there will be a market shortage before processing infrastructure can catch up. And also, there will be a need for an incentive price to incentivize new supply, both within China where a new supply is anticipated but also projects outside of China.
So, in our scoping study, we have disclosed the pricing that we are assuming. We're assuming in the short run for the period from 2028 (when we are assuming we commence production) to 2035 there will be a price that we are assuming and require $3,000 a tonne. That is much higher than the Chinese price to date. But that's about the market for where most of the other participants that are looking to get into this market are targeting the pricing. And that's the incentive price that people need to invest capital in order to get a sufficient return.
But secondly, there's a lot of discussions going on with the parties within the market to find the pricing that would be suitable. So, we are looking at an upfront price that is reasonably similar to what participants are looking for.
We then assume that this market matures and at a point in time, sometime in the mid-2030s, we think that in the longer run there will be an oversupply of material and the price will settle. And for that reason, we have assumed in our scoping study that there will be a long-term price of $1,800.
And so, again, still higher than the Chinese market signal price. But reflecting what we think is going to occur in this market and also reflecting prices also that people, including us, need to incentivize investment in this market. But also we think that will be achievable for the demand and supply side of the HPMSM market.
Hlengiwe [00:10:30] Yeah, it's a certainly there is a lot of activity happening around the high purity manganese sulphate monohydrate space at the moment with producers setting up for this high demand that you mentioned. So, what will be the next step once the feasibility study is complete? I know, it's going to take about 12 months to complete. What's next after that?
Brad [00:10:58] Yes. Thank you. So, you're right. The pre-feasibility study that we're commencing now will take 12 months.
For 12 months from now, what we will be looking to do at the end of this period is to review the study work, which we will have been completed, which will be for this next 12 months.
Building a pilot plant, producing batch samples of material that we can share with potential offtake partners will be refining our engineering work. We will be selecting a particular site to build the processing plant at, and refining in general, all of our assumptions, including building a full funding model. So that will take us forward to the next 12 months.
There will be a decision for the Jupiter Board to make, based on the work that I've just described as to whether we enter into a definitive feasibility study (DFS) phase, which will go for a further 12 to 18 months.
So, this will now take us to the back end of next calendar year at the earliest. And that will be detailed engineering work.
And then a fully, bottomed out commercial work sufficient to support a final investment decision. And that is the point at which we will decide whether or not to invest in this new business.
Post that, you're into construction, which is estimated at this stage to be a two-year build. So, all of that was forward to, targeting production in 2028, which is when we see in general this demand starting to take off.
And most of the potential customers that we're talking to start to require their supply around that time. So, that's the broad timeline. But the next step would be after this one, moving into a DFS stage.
Hlengiwe [00:12:47] Now let's talk logistics, especially on the current manganese ore business, Brad. We've seen manganese prices from the port of Port Elizabeth climb up in the past couple of weeks to above the $3 mark. What's the main driver behind this? And do you see the rally continuing?
Brad [00:13:15] Yeah. So, I would be brave to give you my manganese price crystal ball. But I can tell you what's been going on, so far.
You would have seen, and listeners would have also no doubt observed that through the last six months to 31 December 2023, manganese prices were low and were close for much of that period to five-year low levels.
Tshipi sells off a 37% Benchmark index. And to give you an example, FOB price for our grade of manganese got to $2.66 per dmtu in early December. Our low was $2.61 in 2020. And when the price reached that level back then, it bounced and overcorrected on the upside, quite quickly.
That didn't happen in the manganese price in the six months period that we're just talking about, what you had was fairly unexciting demand levels, globally in China, as steel demand kind of traded sideways. But there low stockpiles in China that existed for most of the 2023 calendar year. And that was a big part of demand, as we just mentioned. But also large suppliers around the world continued to supply at normal levels.
Toward the end of last calendar year that changed. And that was because prices were so low that producers around the world, many of them pulled back on supply. And so that resulted in less ore coming into the market because prices weren't incentivizing the levels of production being sustained at those levels.
And correspondingly, it led to, during the course of January, those persistently high port stockpiles getting drawn down in China. So that is what has resulted in the increase in the manganese price that you just referred to as compared to early December.
Again, for FOB prices at Port Elizabeth for our grade of manganese, which were $2.66 in early December. That's currently sitting at about $3.13 right now.
What you've had at the same time as shipping rates have been quite elevated. So, those FOB prices would actually be a little bit higher than that if it wasn't for the fact that shipping rates are elevated by non-related factors that are happening in the world today.
So, the driver of the increase in the manganese price, over that period of time that I've said has been supply side constraints, demand still hasn't really improved from the levels that it was at, but you had those stockpiles that were creating an overhang of the manganese price have reduced. And that was sold to supply.
So, as we sit here today with the manganese pricing up just mentioned, it's still a bit lower than you would ordinarily expect. It's still lower than the 3 or 5 year average in these prices.
We still aren't seeing a strong pull through from demand, and that's what you would think to see in order to expect, you know, higher than average price. But I believe what we're seeing is, you know, attracting back to a more ordinarily level. $3.40/3.50, something like that.
The manganese market can obviously be affected by not just normal demand and supply factors, but also any disruption factors that might occur in the meantime. But leaving those sorts of factors out, I would expect the manganese price to track up to higher levels than it is right now, whilst not breaking into very exciting levels unless there is a demand pulled through or big supply dislocation.
Hlengiwe [00:17:08] Brad, you mentioned, increasing shipping costs. At the same time, trucking costs are also increasing. And I know, the company uses a combination of both road and rail transport. I just want to understand at what ratio this is. And in terms of road, is it still affordable amid these high trucking costs?
Brad [00:17:34] Yeah, that's a good question. And it's a very pertinent question for South African bulk mining.
As you know, so for Tshipi, as you mentioned before, in any given year recently and a run rate right now, we produce 3.3 to 3.5 million tons per annum. Our rail allocation from Transnet is much lower than that. It's been a little under 2 million tonnes for the last while now.
So if you look at that production, we have a bit over half that is going on rail and the rest of it is going on road via various means to port. As you rightly say, road transport is more expensive than rail, obviously. And so, the more that we could get on the rail, the better.
We have though, been profitable through the cycle hauling via road. What I would say in the last period of time where you see low manganese prices and some producers pulling back on production, but those tend to produce more rail availability for people who are still producing at normal levels. There there's some silver lining to the cloud of low manganese prices. You tend to see a bit of relief on the rail capacity side.
Road is always going to be more expensive than rail. I don't see road trucking costs actually being higher than normal. They're probably lower than normal right now. And that reflects the fact that commodity prices, not just manganese, but all the commodity prices that are relevant in South Africa have been lower.
And so the demand for road haulage, because it's not necessarily profitable for local producers to road haul at lower commodity prices comes off and road transport prices come off commensurately.
Road haulage I think for South African mining, though, is a reality because there's not enough rail capacity to go around for the moment. And so our perspective on that is we want to keep producing at the sorts of level that we've just mentioned and that means we are going to have to contend with road haulage for the foreseeable future.
And so part of our strategy is, thinking about ways that we can road haul in the most efficient, lowest risk and responsible manner possible. And I think being with the fact that that method of transporting ore to report, whilst we have more rail, road haulage is a reality and so we're thinking about ways we can engage with that reality. For the time being and drive the lowest cost and the best risk profile that we can.
Hlengiwe [00:20:23] Lastly, can you give us an update on rail allocations? Rail is undoubtedly a very critical component to your business, as you've just mentioned. How is Transnet going to allocate long-term rail capacity to major producers like Jupiter, while including more emerging miners as part of their strategy.
Brad [00:20:51] Yeah. So that is probably a question for Transnet and just noting that the allocation is at Tshipi at the mine level, rather than at Jupiter. The issue with rail from a manganese perspective has really been one of performance. It's more about production from the Kalahari manganese field over the last 20 years has grown, whereas the capacity hasn't grown. And so, you know, that has meant new emerging miners coming in. And they also would like to get some capacity on rail. That's for Transnet to fix.
But just stepping back to that, from that question. South Africa is endowed with the world's best manganese resources. That's already a very valuable industry for South Africa. The more we can get on rail, the more valuable that industry will be because it is more profitable to rail its tonnes than to road haul. And it's also safer. And so, we are supportive of more capacity being created by Transnet. Not just for us, for everyone, for those reasons.
Hlengiwe [00:22:10] Brad, thanks so much for your time and really laying it all out for us, you know, and we really wish you the best.
Brad [00:22:18] That's perfect. Thank you very much for your time and appreciate your questions.
Hlengiwe [00:22:21] That was Brad Rogers, the CEO of Jupiter Mines. Thank you for joining us on this first installment of the McCloskey Manganese Wrap. For more details, do follow our LinkedIn page. McCloskey by Opis at Dow Jones Company. See you again in the next one.
Exxaro Resources is slashing production costs and driving efficiencies at its South African coal mines to ensure it can continue to reap profits when trucking coal to non-RBCT ports.
High trucking costs are eating into company margins, but some miners with low mining costs are still finding a way to get their supplies to the seaborne market.
Exxaro last year moved just under 0.5 mt by road to alternative ports, representing around 10% of its 5.1 mt exports. The rest was railed to the Richards Bay Coal Terminal (RBCT).
With railing capacity expected to remain severely limited again this year, Exxaro will have to continue trucking its coal to meet its export target of 5.7-6.3 mt this year.
Exxaro’s head of marketing Sakkie Swanepoel said the company has been hard at work to ensure it can keep making money, even if coal prices fall to as low as $80.00/t FOB, basis 6,000 kc NAR. Last month, the Richards Bay 6,000 kc NAR price averaged $91.78/t FOB, the lowest monthly average in three years.
Swanepoel said it was important for Exxaro to develop “value accretive export channels”. This involves the whole value chain, focusing on bringing down production costs, and driving cost efficiencies to allow for coal to move economically through various channels to export markets.
“We've done a lot of work to reduce costs within the logistics value chain, and negotiate for better pricing in the channels,” Swanepoel said during the release of Exxaro’s annual results.
It is critical for the company to service the export market, even at times where there may be an incremental loss, he added.
“As Exxaro, we only can do about 5 mt/y to RBCT at present. It is important strategically that we enable ourselves beyond the RBCT TFR corridor to still run a business and to export coal,” he said, referring to Transnet Freight Rail (TFR).
“We now have a better understanding of what the impact of volume flow to our export markets means for the business - because the moment you stop the export flow, that becomes a big drag back on your business, and might even impact your production levels.”
Exxaro’s mining costs last year averaged ZAR482/t ($25.90). With trucking at the start of the year around ZAR700/t ($37.39), the miner can still stay in the black should prices drop as low as $65.00/t FOB, basis 6,000 kc NAR, according to McCloskey calculations.
To get the most value out of its limited export opportunities, Exxaro plans to increase the amount of 6,000 kc NAR material it ships this year.
Exxaro expects 75% of its exports this year to be of 6,000 kc NAR quality, up from 73% in 2023 and 58% in 2022.
For 2023, Exxaro’s average realised export price was $117.30/t, down 53% from the previous year’s $250.57/t.
Exxaro said it was encouraged by the ongoing work to address the logistics crisis in South Africa, but the group expects this will still take time to resolve.
In the last few weeks, Transnet has increased its weekly railings to RBCT to 1.0-1.5 mt, an “encouraging sign” that shipments could rise above 50 mt this year, Swanepoel said. Last year, Transnet railed 48 mt, which was the lowest in more than 30 years.
“There is no doubt that we have a huge backlog in infrastructure maintenance, both on the coal and iron ore lines. So that is going to take a lot of capital, and it's going to take time to fix,” said Swanepoel. The introduction of third-party operators on the rail lines would also take time before improvements were felt – likely two to three years, he said.
Exxaro remains on the hunt for assets in order to diversify its business away from coal.
As such, the miner continues to target net cash retention of between ZAR12-15bn ($640-800m).
The group has a targeted budget of ZAR2.5bn ($130m) of sustaining capex per year, and continues to roll out equipment replacement and infrastructure strategies, mainly at the Grootegeluk mine.
Exxaro’s chief growth officer, Richard Lilleike, said the group aims to conclude a deal in the next financial year.
Last year’s earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 29% to ZAR13.4bn ($720m) compared to last year.
Hlengiwe Motaung
Andrada Mining is altering its strategy to enter the global battery metals market and focusing on selling petalite from Namibia’s Uis tin mine, instead of spodumene concentrate.
Andrada said it is conducting metallurgical test work to convert its petalite into battery chemicals for long-term supply opportunities, alongside its maiden tin and tantalum production.
The company aims to initially produce 30,000 t/y (from 1.7 mt/y Run-Of-Mine) of a commercial-grade (Li2O > 4.20%) petalite concentrate at its flagship Uis Mine by utilising the discard from the tin pre-concentration circuit as feed to a petalite beneficiation circuit.
"In the short-term, we are targeting initial sales of our pilot plant production into the spot glass-ceramics market whilst progressing with offtake discussions across the lithium value chain to access the battery market," said CEO Anthony Viljoen.
In December 2023, the company got exploration samples revealing spodumene concentrate, at 6.8% Li2O at its Lithium Ridge licence area. However, the company announced last week that, "petalite offers the company a more strategic and capital-efficient entry point into the lithium market than spodumene." Industry experts say petalite typically contains significantly less lithium than spodumene, translating to higher mining costs.
Andrada says that it will leverage on existing infrastructure, which will reduce upfront costs associated with building a separate lithium processing plant.
"This petalite production circuit will not result in additional mining costs but only the incremental cost of beneficiation. The Company expects the petalite production to contribute substantially to overall EBITDA and anticipates that funding will be through existing lenders and or new finance partners as required," added Viljoen.
For financial year 2023, Andrada’s revenue totalled £9.8m ($12.5million). The company expects sales of petalite concentrate to increase total revenue by between 50-80%, depending on the effective prices for tin, tantalum and petalite concentrate.
After reporting record volumes at its Mozambique operations, private logistics firm Grindrod is bolstering its investment in ports and rail in a bid to definitively position itself as an influential operator in the region.
Grindrod’s Mozambique port facilities have proved to be a popular alternative export route for South African cargos and especially commodities like coal, the movement of which has remained frustrated by Transnet’s poor railing performance and inefficiencies at the ports of Durban and Richards Bay.
Record volumes of 12.9 mt were handled at Grindrod’s dry bulk facilities in Mozambique last year – with volume growing by 10% and 22% for the Maputo and Matola terminals respectively. The company does not break volumes down by specific commodity.
The growing demand for Grindrod’s facilities saw the group grow its headline earnings by 29% to ZAR1.4bn ($70m) for the year ended in December.
Through a near 25% shareholding in the Maputo Port Development Company (MPDC), Grindrod will continue to invest in expanding the facilities at the Maputo port.
Its resolve to do so has been bolstered by a concession extension for MPDC to run the port until 2058. Grindrod CEO Xolani Mbambo told investors he had last week been assured a corresponding sub-concession extension for the Matola Coal Terminal would soon be granted too.
Grindrod will spend the bulk of its ZAR2.5bn ($130m) capital expenditure budget over the next two years on increasing capacity at the Matola terminal from 8.9 mt/y to over 12 mt/y, mainly through replacement of equipment. The group will also prioritise capex to execute its rail strategy and position itself as an influential rail operator in the region. This, Mbambo said, is key for Grindrod to be able to unlock cargo volume flows to its own terminals.
Grindrod rail operations last year moved a total 9.2 mt in commodities and general freight across Southern Africa.
Spend on Grindrod’s rail strategy will ramp up over time, especially as plans for third party access on South Africa’s rail lines firm up.
“We are relentless in pursuing collaborative breakthrough opportunities with various rail authorities, operators and customers to unlock potential in the region, focusing on the corridors where we operate,” said Mbambo. “Rail to feed our ports and terminals is critical and that's why we're investing.”
Grindrod sees rail as especially critical now for coal, as prices have stayed below $100/t FOB, basis 6,000 kc NAR, since mid-December.
“On average, a truck costs you around ZAR700/t from a sighting in Witbank (a coal-rich area in South Africa) to Maputo. A train will cost you around ZAR350 to ZAR400. So if one is able to access to run on rail corridor, suddenly you create a hedge for your customers, some of whom can actually be in a position to withstand a coal price drop as far down as $70/t depending on the cargo type,” Mbambo said.
At the port of Richards Bay, where Grindrod’s 6.1 mt capacity Navitrade terminal is connected by conveyor belt, rail has to work for the facility to operate profitably.
“We have two tipplers there. We can handle about 28 trains a week and currently we're running less than 10 trains a week. So there is scope to grow the volumes.”
Mbambo said Grindrod was heartened by customer calls for contracts of longer than three to five years. “This is a vote of confidence from our customers in terms of the service offering that we provide to them,” he said.
It however may also indicate a loss of confidence in Transnet’s ability to decisively deal with the logistics crisis in South Africa.
Global manganese ore prices rose to nine-month highs on production cuts in South Africa, while India manganese alloys markets eased further on a supply overhang due to weak demand.
South Africa’s price of 37% manganese content ore jumped to $3.15/dmtu, up from $3.01/dmtu, and the highest since June 2023, market sources said.
On a delivered basis, the price of 37% manganese content ore increased 1% to $4.02/dmtu CIF Tianjin, from 3.97/t dmtu in the previous week, tracking a continued firmness in freight rates.
The price of ore with 44% content inched up to $4.42/dmtu CIF Tianjin, from 4.38/dmtu. The prices are rising mainly due to significant production cuts in South Africa and strong freight rates.
Cape rates from South Africa’s Richards Bay terminal to Fangcheng in China rose to $20.20/t on 1 March, from a low of $14.90/t on 26 January, according to McCloskey assessments.
In India, domestic manganese ore miner MOIL saw February production rise 15% year on year to 151,000 t, while sales jumped 18% year on year to 156,000 t.
On a monthly basis, February production was down 6%, from 160,000 t in January, while sales were up 16% on the month, from 134,000 t in January.
Production in April 2023-February 2024 rose 37% year on year to 1.58 mt, while sales rose 32% to 1.39 mt. MOIL expects future production to grow further amid a significant ramp up in exploration.
Meanwhile, Indian manganese alloys market remained soft with a downward bias seen in prices for silico-manganese (SiMn) and ferro-manganese (FeMn) due to tepid demand for exports.
Many steel mills in Europe, Japan and Southeast Asia have reduced their manganese alloys intake amid sluggish steel demand.
Despite the sluggish overseas demand, many manganese alloys producers continue to operate at near full capacity, said an industry source.
Some producers have shifted to low carbon, low silica content and niche alloy production in an attempt to reduce their dependence on buyers of bulk alloys.
At least two producers in Durgapur region said they have been focusing on producing niche alloys by using superior grades of manganese ore for the last several months.
An official of an Indian steel plant in the northern Indian state of Madhya Pradesh said they have nearly stopped producing steel. “As such, we have not been buying silico-manganese for the last two months,” the official said.
Meanwhile, many in the market expect a slowdown in domestic demand for manganese alloys as India faces general elections later this year.
“This will likely restrict government spending on infrastructure projects and slow steel demand in the country, which will curtail the demand for manganese alloys at least till May,” said an official of a steel company.
Offers for SiMn (60-14) in Durgapur, Raipur and Vizag regions ranged between INR66,000-67,000/t ($797.62-809.70/t) on 8 March, down from around INR66,500-67,500/t ($803.66-815.74/t) a week earlier.
Export offers for SiMn 60-14 grade was heard at around $810-840/t FOB and that for 65-16 grade SiMn at around $890-920/t FOB.
Domestic offers for FeMn 70% in Durgapur and Raipur regions were between INR66,500-67,000/t ($803.66-809.70/t), while export offers for FeMn 75% ranged between $880-900/t FOB.
Offers for high carbon ferro-chrome (FeCr) used in stainless steel production were heard between INR119,500-120,000/t ($1,444.17-1,450-21/t), while that for ferro-silicon (FeSi) 70% were heard at around INR102,500-103,000/t ($1,238.72-1,244.77/t).
Despite a well-supplied market, some producers are looking to increase their production capacity further.
Shree Ambey Ispat of Bankura in West Bengal is awaiting approval from the Ministry of Environment to nearly treble its ferro-alloys production capacities in the next three years.
The company plans to raise its FeMn production to 67,000 t/y, from existing 22,600 t/y and SiMn to 50,200 t/y, from 17,400 t/y.
It also plans to raise FeSi capacity to 22,800 t/y, from the current 7,600 t/y and aims to secure ore supplies from imports and domestic miners.
Now that the leadership vacuums at Transnet and Eskom are filled, all eyes are focused on how quickly the new CEOs will be able to turnaround these struggling state behemoths.
Last week, Michelle Phillips was appointed the head of Transnet after filling in as the acting CEO for the past four months, while Dan Marokane took over as Eskom’s leader on Friday.
Eskom and Transnet are arguably the most important institutions to South Africa’s coal industry, with the state utility being its biggest customer and Transnet Freight Rail, its main lifeline to the seaborne market. Turning them around after years of poor performance will be key, not only for the coal industry’s future, but also for the entire South African economy.
In just a few months as acting CEO, Phillips has already impressed. Phillips, a 20-year Transnet veteran, has drastically improved the company’s relationship with the mining industry, after hitting rock bottom under her embattled predecessor, Portia Derby.
“We have, over the past few months, seen a much-need improvement in the relationship between the country’s transport and logistic authorities and those businesses whose existence is dependent on efficient and effective logistics,” said Mxolisi Mgojo, president of Business Unity South Africa (Busa).
Despite all the goodwill, Transnet Freight Rail’s performance continues to underwhelm with coal railings hindered by cable thefts, power outages and scant locomotives.
Export coal railings to the Richards Bay Coal Terminal (RBCT) totalled around 8.13 mt in the January-February period, translating to around 49.6 mt on an annualised basis. That is slightly better than last year’s 30-year low of 48 mt, but well below its normal average of around 70-75 mt/y.
Along with Phillips’ appointment, Russell Baatjies was confirmed as the head of Transnet Freight Rail (TFR) last week, after serving as acting CEO following the resignation of Sizakele Mzimela at the end of October.
Phillips and Baatjies will be in charge of implementing Transnet’s ambitious ZAR100bn ($5.3bn) two-year turnaround plan, which includes further opening up the vital rail network to private-public partnerships.
If its plan is successful, Transnet forecasts export coal volumes on the North Corridor could increase to as high as 70 mt/y. That is well above TFR’s current 60 mt target for this year and RBCT’s 50-55 mt more conservative forecast for 2024.
For Marokane at Eskom, the turnaround plan appears to even be more daunting with the state utility struggling to keep the lights on. South Africa experienced its worst power crisis last year with regular stage 6 load shedding throughout 2023.
“(Marokane) rejoins Eskom at a time when the organisation faces an existential challenge and is undergoing significant changes that requires hands-on, bold and decisive leadership,” said the Eskom’s board of directors.
Marokane was previously a senior manager at Eskom from 2010 to 2015, also holding various senior positions before that including head of Group Capital.
The new CEO will need to quickly improve the performance of its 14 coal-fired power plants, which provided nearly 90% of Eskom’s generation last year.
“We expect Dan and his leadership team to accomplish two critical tasks. First, they must address the current business challenges. Loadshedding must become a thing of the past,” said Eskom Board Chairman Mteto Nyati. “Second, they need to reposition and restructure Eskom to enable growth and sustainability.”
Eskom is by far South Africa’s biggest coal user, consuming 102 mt of coal in FY2022/23, or nearly half of the country’s total output. It typically burns 4,800 kc NAR material.
As a result, any major shift in Eskom’s policies could have a major impact on the future of South Africa’s coal producers. Of particular interest is the growing push by President Cyril Ramaphosa’s administration to extend the life of Eskom’s oldest coal plants by as much as a decade, a scenario that will require greater investment in domestic coal exploration.
“The job (Marokane) is taking on is anything but easy,” said trade union Solidarity. “And to make Eskom successful, he will have to be able to withstand the pressure from above.”
Hlengiwe Motaung
Battery metals firm Marula Mining has reached a deal with Gems and Industrial Minerals (GIM) to buy a majority stake in its Larisoro Manganese mine in Kenya, aiming to quickly ramp up output within a few months.
Marula, an Africa-focused miner listed on London’s Aquis exchange, announced on Friday it had signed a binding terms sheet with Kenya’s GIM to purchase a 60% stake in Larisoro for a total of £1.55m in cash and shares.
Larisoro has only been producing intermittently since it started operations in 2012 due to limited investment and expertise, Marula said.
Marula, which already has investments in lithium, tantalum and rare earths in South Africa and Zambia, said it plans to invest an initial $1.5m to ramp up Larisoro production to 5,000-10,000 t a month within six months, and a longer-term target of as high as 25,000 t/m.
It is also looking to increase the quality of the ore to as high as 44% content from the current 37%.
“With its historical high-grade assays, production history, established operations, existing stockpile of material, and the interest we have already received for offtake and marketing of the planned increased manganese production, we are pleased to proceed with this investment," Jason Brewer, Marula Mining PLC CEO, said.
The company said it was in advanced talks with a European-based commodity trading group over the offtake and marketing of 100% of the saleable manganese ore. Its potential partner already exports manganese ore in East Africa through its own port facilities.
Following the signing of the Term Sheet, Marula agreed to pay GIM £300,000 through the issuance of 2.4m of ordinary shares in its company at a price of 12.5 pence per share. A further £200,000 will be paid following the signing of the technical support and commercial agreements, which is expected later this month.
The remaining £1.05m will be paid to GIM in stages as initial exploration begins and sales reaches its first 50,000 t.
Marula has an option to increase its interest in the mine to 70% through a further payment of £1.25m in cash or share.
South African FOB manganese prices rose to a six-month high on higher Chinese demand, while ferroalloys eased due to a lack of fresh buying.
South Africa’s price of 37% manganese content ore climbed to $2.94/dmtu, up from $2.87/dmtu in the previous week and the highest since early August 2023, market sources said.
On a delivered basis, the price of 37% manganese content ore rose 3% to $3.93/t dmtu CIF Tianjin, and the 44% content price was unchanged at $4.28/t CIF Tianjin for a fourth consecutive week.
In India, domestic manganese ore miner MOIL conducted a series of e-auctions on 26 February to sell high-carbon ferro-manganese (FeMn), FeMn slag chemical and manganese ore of dioxide grade.
MOIL offered 1,575 t of manganese ore of dioxide grade from the Dongribuzurg Mine in the Bhandara district of Maharashtra.
It also offered 2,000 t of HC FeMn from the Balaghat plant in Madhya Pradesh for sale in four lots. The manganese content of the offerings ranged between 63% and 72% (+/-1%).
MOIL finally offered 4,000 t of FeMn slags with manganese content of 36% (+/-1%) in one lot from the same plant.
The outcome of the auctions is not yet available.
In India’s ferroalloys markets, offers for silico-manganese (SiMn) and FeMn eased slightly due to the lack of fresh interest from domestic steel makers and continued sluggishness in export demand.
However, several regular SiMn tenders emerged during the week, including one for 3,500 t from AM/NS for supplies in March-April. The submission is on 1 March.
Domestic offers for SiMn 60-14 from producers in Raipur and Durgapur region were heard in the range of INR67,000-68,000/t ($808.38-820.44/t), down from INR67,500-68,500/t ($814.41-826.48/t) in the previous week.
Offers from producers in Visakhapatnam region were heard at around INR68,000/t ($820.44)/t, down from the previous week’s INR68,500/t ($826.48/t).
There were a few export offers for SiMn for 65-16 grade at around $900.00-910.00/t FOB, a tad lower than the previous week, and that for 60-14 grade at around $825.00/t, though bids continued to remain lower by $20.00-30.00/t.
Offers for FeMn from Raipur and Durgapur regions eased during the week and were quoted at around INR67,500-68,000 ($814.41-820.44)/t.
A few export offers for FeMn were heard in the range of $900.00-920.00/t FOB.
There were a few unconfirmed offers for FeSi from Guwahati in the range of INR106,000-107,000 ($1,278.93-1,290.99/t).
Market sources said SAIL booked around 16,000 t of FeSi through auction for usage at its Rourkela Steel Plant (RSP), but the price could not be confirmed. The steel maker had floated a tender in January, inviting offers from suppliers by 27 January.
Ferro-chrome (FeCr) prices in the domestic market remained firm with upward bias and was heard quoted at around INR119,000-120,000/t ($1,435.78-1,447.84/t), from the previous week’s INR117,500/t ($1,417.68/t).
Hlengiwe Motaung
Transnet's East London Multipurpose Terminal expects to export 150,000 t of manganese ore in financial year ending March 2024, after shipping its first cargo in October.
The terminal has already exported 99,706 t of manganese since loading its first 30,000 t cargo from producer Tshipi é Ntle.
The terminal is handling one manganese ore vessel a month, carrying on average around 30,000 t, said terminal manager Naliya Stamper.
Transnet has said it wants to ramp up manganese ore exports out of East London to 500,000 t in financial year ending March 2025. East London is one of the top three export terminals for South Africa’s manganese ore shipments, along with Port Elizabeth Bulk Terminal and the Saldanha Multipurpose terminal.
Transnet’s overall rail capacity for manganese ore exports is expected to rise 11% to 18 mt/y in financial year 2024/25, with at least 30% of the new capacity committed to emerging miners.
Hlengiwe Motaung
Countries in sub-Saharan Africa are moving forward on ambitious rail projects to take advantage of increasing global demand for battery raw materials, threatening to leave Transnet behind as South Africa’s state-run company struggles to keep pace.
From Namibia to Zimbabwe and Zambia to Angola, rail operators and governments in the Southern African Development Community (SADC) are attracting huge investment to build the infrastructure necessary to get lithium, copper, chrome, cobalt and other battery metals to seaborne markets.
In Zimbabwe, Grindrod's majority owned (85%) Beitbridge Bulawayo Railway (BBR) has completed the construction of the West Nicholson Rail Siding, a new rail line that will be linked to the Bulawayo-Beitbridge main line and handle lithium and chrome cargo bound for the ports of Maputo, Richards Bay and Durban.
"The operations should begin soon. We are waiting for about three locomotives with 100 wagons that are meant to service this siding,” BBR’s general manager, Raymond Shoniwa, told McCloskey, adding that the trains should be delivered within days once the clearance process is complete.
The inaugural cargo to the new rail siding, located 170km from the Beitbridge border, will be spodumene from Zimbabwe's Mbeta Lithium and Sandawana mine, which is owned by Kivumba Mining House.
In Zambia, the Lobito Atlantic Railway Corridor took centre stage this month with the United States pledging $250m in financing to help upgrade a 500km rail section linking Zambia and the Democratic Republic of Congo (DRC) to Angola’s Lobito port. The project is being developed by a consortium of investors comprised of Trafigura, Mota-Engil and Vecturis, which has been awarded a 30-year concession to operate the railway.
Ivanhoe Mines reached a deal with Trafigura earlier this month to be the first long-term user of the Lobito Corridor, obtaining the rights to transport 120,000-240,000 t/y of copper concentrate from its Kamoa-Kakula in the DRC to Lobito for at least six years.
“Linking the copper-rich mining region to the sea, the Lobito Corridor ushers in myriad new opportunities for economic growth and development that will unlock the region’s commercial competitiveness,” said Ellington Arnold, the manager of the U.S.-Africa business center at the U.S. Chamber of Commerce.
Analysts see this project as the US’s belated answer to China’s Belt and Road Initiative in Africa, where Beijing has provided billions of dollars in financing for transport projects throughout the continent.
Once built, the Lobito Corridor could divert a significant amount of freight and economic value from South Africa, said David Taylor, a transport and rail consultant with TayloRail.
"Countries in SADC and East Africa have gone through periods of conflicts and reparations and have now become market-sized economies. These economies are flourishing in their own right and are realising that infrastructure is the key to sustainable economic growth," he said.
South Africa’s ports are already losing some of its market share to Mozambique, especially to Maputo, due to Transnet’s poor rail performance.
As a result, the Port of Maputo handled record volumes of 31.2 mt in 2023, while South Africa’s Richards Bay Coal Terminal (RBCT) shipped a 30-year low of 47 mt.
"There is massive infrastructure spend that is going on to start diverting these flows away from South Africa's ports,” Taylor said. “This is going to be a bigger issue later because South Africa was well-positioned to be the entry-point into the African continent with the free-trade agreement but now it has lost that position."
Land-locked Botswana has long wanted to connect its coal fields with Transnet’s main export routes in South Africa but without success.
The country is now advancing discussion with Namibia on building the Trans-Kalahari Railway (TKR), which could provide a 1,500km rail link for Botswana's coal fields and other commodities to Namibia's Walvis Bay port.
At least 12 international companies have expressed interest in participating in the project. The two countries are expected to award the project in May.
"Transnet's historical lack of focus on competing ports with our neighbours on Walvis Bay and Maputo has really led to our supply chains being hampered," a committee member of South Africa’s National Logistics Crisis Committee (NLCC) told McCloskey.
"There is an arrogance that we have in South Africa that has been at Transnet for the past 10-15 years,” he said. “This arrogance has sterilised any type of growth to the point that things are falling apart.”
South African manganese ore prices were little changed on limited demand from China due to Lunar New Year holidays, while ferroalloys in India remained stable.
South Africa’s price of 37% manganese content ore eased to $2.87/dmtu, from $2.90/dmtu in the previous week, market sources said.
On a delivered basis, the price of 37% manganese content ore was unchanged at $3.80/t dmtu CIF Tianjin, and the 44% content price was also unchanged at $4.28/t CIF Tianjin.
India’s manganese ore imports fell to 0.50 mt in December, down from 0.62 mt in November, but significantly higher than the 0.28 mt in December 2022.
Of that total in December 2023, 0.19 mt was of 30-40% manganese content, while grades of 40% and above accounted for 0.26 mt. Lower grades, concentrates and sinter accounted for around 57,000 t.
With regards to import origins, South Africa was top at 0.32 mt, followed by Gabon at 0.18 mt.
In India’s ferroalloys markets, offers for silico-manganese (SiMn) and ferro-manganese (FeMn) remained stable with a slight upward bias, while ferro-chrome (FeCr) eased.
The huge gap in prices of FeCr in the domestic market and that for exports eased a bit during the week, a producer said.
“The market is still getting impacted by the Red Sea issue and as such offers for manganese alloys in the domestic market have eased and for exports were nearly stable,” said an official of a leading producer.
Domestic offers for SiMn 60-14 from producers in Raipur and Durgapur region were heard in the range of INR 67,500-68,500/t ($813.37-825.42/t) on 19 February, up from INR67,000-68,000/t ($807.34-819.39/t) on 12 February.
Offers from producers in Visakhapatnam region were heard at around INR68,500/t ($825.42/t).
A trader of imported manganese ore, who also exports ferroalloys, said he heard a few export offers for SiMn for 65-16 grade at around $940.00/t FOB, a tad lower from $950.00/t in the previous week, and that for 60-14 grade at around $840.00/t, from $850.00/t FOB, though bids were lower by $20.00/t.
A few export offers for FeMn were heard at around $900.00/t FOB, he added.
In the FeCr market, domestic offers were largely unchanged week on week on 19 February at around $117,500/t ($117,500/t), while export offers were at around $1,204.99/t or INR100,000/t.
Transnet’s rail capacity for manganese ore exports is expected to rise 11% to 18 mt/y in financial year 2024/25, with at least 30% of the new capacity committed to emerging miners.
Transnet’s rail network has not been able to keep pace with manganese exports, forcing producers to truck a significant portion of their supplies to ports.
South Africa, the world’s largest manganese ore exporter, shipped 22.4 million wet metric tonnes (wmt) last year. Of that total, around 6.2 million wmt, or nearly 30%, was trucked.
Rail capacity at Transnet’s Port Elizabeth/Ngqura channel will increase by 1 mt to total 12 mt/y starting in financial year ending 31 March 2025, while the Saldanha Channel will rise 0.8 mt to reach 6 mt/y, said Bonginkosi Mabaso, the rail operator’s chief commercial officer, at a recent McCloskey Manganese Lunch in Cape Town.
By FY2027/28, Transnet aims to expand its rail capacity at the two channels to as much as 22-24 mt/y, with Ngqura the primary channel at 16 mt/y followed by Saldanha at 6-8 mt/y.
“In the next 10-20 years, some long standing incumbent manganese mines will come to end of life. Demand will therefore outpace supply by 2030,” Mabaso said. “Growth in manganese production volumes will be necessary to keep pace with demand.”
Transnet’s expansion programme is based on plans to move South Africa’s main manganese export terminal from Gqeberha (previously known as Port Elizabeth) to the nearby Ngqura port, located 20km away.
South African manganese ore prices eased further on limited demand from China due to Lunar New Year holidays, while ferroalloys offers in India firmed up on volatile freight rates to Europe and an increase in input costs.
South Africa’s price of 37% manganese content ore eased to $2.90/dmtu, from $2.91/dmtu in the previous week, market sources said.
On a delivered basis, the price of 37% manganese content ore rose to $3.80/dmtu, from $3.78/t dmtu CIF Tianjin, on 2 February, while the price of 44% content ore was unchanged on the week at $4.28/t CIF Tianjin.
In India, offers jumped between INR1,500-2,000/t ($18.07-24.09/t) for nearly all grades of silico-manganese (SiMn) and ferro-manganese (FeMn), while the ferro-chrome (FeCr) market remained steady.
“Offers for manganese alloys, both for the domestic sales and for exports, continue to look up, but it has nothing to do with supply-demand. It is primarily because of the Red Sea issue and an increase in input costs,” said an official of a leading producer.
Freight rates have gone up because European-bound vessels are being forced to avoid the Red Sea and take alternative routes, extending their voyage time by nearly double.
As a result, European buyers are stocking up to secure cargoes well in advance, said a second producer.
Domestic offers for SiMn 60-14 from producers in Raipur and Durgapur region were heard in the range of INR67,000-68,000/t ($807.08-819.13/t) on 12 February.
Offers from producers in Visakhapatnam region were heard at around INR68,000/t ($819.13/t).
A few export offers for SiMn for 65-16 grade were heard at around $950/t FOB and that for 60-14 grade at around $850.00/t FOB, though bids were lower by $10-30/t.
In the FeCr market, domestic offers were largely unchanged week on week on 12 February at around $117,000-118,000/t ($1,409.39-1,421.43/t), while export offers were around $1,216.00/t or INR101,000/t.
The firmness in manganese alloys prices “will be very short-lived unless fundamentally the European steel production improves, which is highly unlikely because of various factors, including stringent CO2 emissions norms and the market dynamics,” a leading exporter said.
One FeCr producer said the Indian manganese alloys industry was starting to overproduce.
“It is not that Mn alloys are not available. It is available in plenty. But the question is where do they park their material and therefore everyone is struggling,” he said.
If India reduces manganese alloys production by 5-10%, then prices could surge by 10-15%, sources said.
“At present no producer wants to cut output and everybody is looking at others to start cutting production,” said an official of a trading firm.
Members of the McCloskey forecasting team were among 300 other industry delegates at last week's McCloskey's Southern African Coal Conference in Cape Town. The team also spent a few days in Johannesburg meeting with a number of top coal executives.
Our key takeaways from the trip were:
Mixed views on Transnet in 2024. The mining majors, who have been investing in helping Transnet, were generally optimistic for improvement this year. In particular, they cited the strong December performance by the company. Other companies, who have not made investments, were generally more dubious on improvement, and one feared downside.
Takeaway: Our read was that clearly Transnet understands the problems well - they aren't flying blind. And actions are being taken. Locomotives will take time but modest improvements should come.
Most truck capacity is out of the money, and trucked flows will decline this year. Transnet volumes might improve but they'll be offset by lost truck volumes, where a significant portion of trucking is uneconomic. We heard that truck volumes have declined, and we heard about trucking companies calling around looking for business. This is of course simply a reflection of current market prices. Our concern is that market prices will likely stay low for a while (more on that below); how will trucked capacity be kept online for when the market does improve? If Transnet and RBCT can get back to capacity in a few years then it won't be an issue. But if that trucked capacity is needed to be a swing supplier then it may have gone to other commodities in the meantime, and will take some time (and strong rates) to improve.
Takeaway: Combining the Transnet and trucking news, we maintain our view that South African exports will likely hold steady this year, but with upside in 2025.
Little thermal coal market upside this year. Two winters in a row have created an oversupplied market. Most people seemed to buy our logic around a $90/t FOB Russia price. We expect that the market could easily dip below that level to get rid of some Russian spot tons (and maybe some marginal tons from elsewhere), but that ultimately the market will need those tons once it's rebalanced - so we'll need to return to that support level. There's clearly also a lot of concern about a flood of LNG capacity coming online mostly in 2026 - and how it will weigh down on the market for a couple of years at least thereafter, with LNG pricing down to gain demand from coal.
Takeaway: Our one (big) caveat here is on supply. There are lots of bearish demand drivers. But the current seaborne thermal market is *huge* - literally the biggest it's ever been (up around 1.1 bnt). And we're in an El Nino. The Australian Bureau of Meteorology is forecasting a return to a neutral El Nino/Southern Oscillation index by June. If a La Nina follows, Indonesia and thermal coal production out of Queensland will be impacted, and that could give some life to the market in 2025.
Will Indian imports stop growing? There were multiple views that Indian imports for the power sector will stop growing, perhaps soon. The logic was that import-burning capacity hasn't been growing as much as inland capacity, much of which is mine-mouth capacity. However, there were also views that this outlook is too optimistic, and that new capacity that is a little inland will need to pull on imports too as Coal India and other producers steadily find it harder to grow coal production over time. This remains our view. We have maintained an expectation that the lowest hanging fruit on improving Indian production is already being pulled upon, and meanwhile power demand growth is huge - even before considerations like growth in overall electrification.
All agree ongoing Indian imports for industry (sponge iron, cement, bricks) will continue to grow.
Takeaway: We will maintain our growth trajectory for Indian imports, but will be watching for any signs of downside either in imports or domestic production, or stalling of domestic power demand growth.
Chinese imports will remain strong. Literally everyone agreed on this. The only disagreement was how strong. On the upside, a seller made a case for thermal imports of 370 mt this year. The logic was the return of industries like cement that were weak last year. The lowest we heard was 280 mt. Our current forecast is 300 mt - a bit of a pullback from last years 328 mt, on the back of some improvement to hydro output (a weak vs strong hydro year in China equates to a swing in imports of around 60 mt). We also expect that Chinese imports remain strong at least through this decade, and likely longer assuming expected electrification and resultant power demand growth eventuates. General expectations of Chinese prices around the 1000 RMB level too.
Takeaway: If anything, we were left thinking our 300 mt import level might be too low. But we're really concerned about supplying a global seaborne market this size, as we discussed above. Chinese imports will likely be above 300mt this year, but if a La Nina kicks in late in the year then China's import level might end up being constrained by the ability of the market to supply it.
Growing South African penetration into Japan. Producers heralded the growth of this relatively new South African market.
Takeaway: We wonder if it will help break the back of the market power of Newcastle 6,000 kc NAR producers. Japanese buyers certainly hope so.
A slowing energy transition. Coal demand in Europe and the US is slowing, no doubt. But in the US there's competition from cheap natural gas, and in Europe a carbon cost (plus gas) driving that downturn. Elsewhere in the world, we're of the view that the energy transition is slowing, and what we heard in South Africa echoes this. Aside from Chinese imports booming and a strong coal plant build in China, India and (to a lesser extent) SE Asia, we heard of coal plant restarts in South Africa. There was scepticism from some around the $80bn/R1.5trillion allocated to South Africa for renewables and hydrogen at COP28. And in the latest IRP, there's a scenario where coal plants lives are extended and are coupled with CCUS.
Takeaway: Unlikely that new coal plants are ever being built though - the high capital cost and possible international condemnation being the main challenges.
Falling coal prices could create a “perfect storm” for South Africa’s junior miners, as trucking supplies become uneconomical and rail capacity remains extremely limited.
If Richards Bay 5,500 kc NAR prices fall to $75/t FOB, trucking coal to Transnet’s Richards Bay dry bulk and multi-purpose terminals will no longer be economically viable, Menar Managing Director Vuslat Bayoglu told delegates at the McCloskey Southern African Coal Conference. Last week, McCloskey assessed Richards Bay 5,500 kc NAR at $79.01/t FOB, up slightly from $78.78/t FOB in the previous week.
“In the next month or two, there won’t be anything going (on truck). Everything should be going on rail,” Bayoglu said in a panel of industry leaders last week. “Then it becomes the perfect storm for Transnet and for the coal mining industry because now coal mines have to rail the coal. But the rail is not available, so what can you do?”
Alan Waller, CEO of the Richards Bay Coal Terminal (RBCT), estimated miners have to pay around ZAR700-750/t ($37-40) to truck coal compared to ZAR226-230/t ($12) for rail.
Rail allocations on Transnet’s rail line to RBCT are dominated by a dozen major coal producers, which include Menar. Those without rail allocations need to qualify through RBCT’s 4 mt/y Quattro programme or truck their coal.
Bayoglu said companies that can only truck their supplies to the export market could be forced to retrench workers.
“We don’t want to find ourselves in a position where we start slowing down production. Slowing down production means (retrenchment),” he said. “It is critical as an industry to keep these jobs safe.”
Last year, Seriti’s Klipspruit mine and Glencore’s iMpunzi mine launched retrenchment processes that threatened hundreds of jobs.
“We have gone through a tough retrenchment at one our big operations,” Seriti CEO Mike Teke said in the same session. “We went through that simply because…you have to make sure the business survives. And for the business to survive one of the options is retrenchment - it has been painful.”
A senior government adviser warned the industry that they would lose Pretoria’s support if there were any more retrenchments.
“As government, I wouldn’t support coal if you guys are retrenching people. You retrench, close down,” said Silas Zimu, the special advisor to Electricity Minister Kgosientsho Ramokgopa, during the keynote at the conference.
“It’s not going to send the right message…we are supporting you and then you guys on the other side are retrenching.”
Kgabi Masia, Exxaro's chief operations officer, said the miner was not cutting production nor considering retrenchments, despite the drop in prices.
"For the coal that goes on rail, $100/t is still a good price," said Masia in reference to the Richards Bay 6,000 kc NAR price, which averaged $94.79/t FOB in January. "The conversation is around the trucking costs. If you have rail, and coal is at $100, then you are still in good business. We have operated mines before at $65/t."
Bernard Dalton, Thungela's head of marketing, agreed that current prices were still good for those with rail allocations.
"We had prices at $45/t at one stage and somehow some of us we were able to survive," Dalton said at the conference. "A price at $90/t plus is still a good price and we should be able to make a margin."
Hlengiwe Motaung
The sharp drop in global export prices has led to a 30-40% decline in coal thefts along the main motorways to South Africa’s ports, as thieves shift their attention to more lucrative opportunities, a security expert told McCloskey.
A Johannesburg-based trucking software company, said it was finding fewer export trucks being targeted by the so-called coal mafia, a sophisticated network of smugglers that steal high rank coal and replace it with much lower quality material.
"There's less appetite for coal now. Theft has decreased on the export route and has now shifted to the domestic route, which is more profitable," said the company’s managing director.
The transport software, which can track a truck’s weight from mine to end user in real time, discovered around 4,000 suspected coal theft cases last year for its clients, many of which are coal producers in the Mpumalanga area.
“So, what happens is that they shift from the coal exporting (routes) to the more profitable route, which is the Eskom one,” Brodner said. “At this point, I would say (thefts on export routes) have decreased by 30-40%, but I’m pretty sure it is because there has been a shift in their route.”
When Richards Bay 6,000 kc NAR prices soared to record highs above $400/t FOB in mid-2022, coal thefts ran rampant with many trucks being reloaded with cheaper coal as soon as they left the mines.
"The incidents usually take place at night, but people became so brazen that it happened at any point in time during the day," the MD said.
Using the transport tracking software and satellite maps, the software company found at least 23 illegal blending sites along the N4 and N2 routes to the ports, with hotspots in Witbank, Belfast, Ermelo and Middleburg.
The security source said that most theft incidents take place about 500-600 meters from weighbridges, meaning that controllers monitoring trucks with traditional tracking systems would assume the truck is still on the right route.
"A driver then deviates to a blending site where they take between 8-15 minutes to switch the coal,” he said.
The problem became so widespread at times that Eskom’s power plants were regularly receiving poor quality coal that wrecked their boilers, requiring unplanned maintenance. That has been a major factor in crippling the power utility’s ability to generate electricity for the South African grid.
Eskom typically receives 4,800 kc NAR coal, which can also be diverted into the export market.
A source who owns multiple trucks in the Mpumalanga area told McCloskey that some truck drivers were offered up to ZAR10,000 ($530) to switch the coal, and threatened if they didn't take the bribes. At the height of the export market, 25 t trucks could be carrying coal worth as much as ZAR200,000 ($10,650).
"Some of my honest drivers do come forth to tell me of bribe attempts and others just keep the money," he said. "There's no way I can pick it up. I have 300 trucks. I can't monitor them all at the same time."
Because these crimes are often carried out by syndicates, truck owners say cracking down on them can be tedious and at times fruitless.
"These criminals are always a step ahead. They keep finding ways to cheat advanced technologies,” the truck owner said. “Police also don't have the capacity to investigate every coal theft. It will take 10 months to get to the bottom of it, so miners just keep producing and we continue trucking.”
Authorities have tried to limit the problem, launching a major search and seizure operation in October across five provinces.
The authorities reportedly descended on 30 addresses including mines, offices and unregulated coal yards alleged to be involved in the stealing and swapping of coal meant for Eskom’s power stations.
Several preservation orders were served and equipment worth more than ZAR60m ($3m) was seized. A number of bank accounts have been frozen with hundreds of millions of rand involved.
Authorities estimated its October crackdown prevented the loss of revenue to the fiscus of more than ZAR500m ($26m).
The operation involved the police (some 150 officers) and officials from the departments of home affairs, environment and mineral resources and energy.
Global manganese ore prices were little changed during the week, while Indian manganese alloys prices for exports and domestic markets were also stable, though a steep firmness emerged for chrome alloys.
South Africa’s price of 37% manganese content ore rose/eased to $2.92/dmtu, from $2.91/dmtu in the previous week and the highest since early August, market sources said.
On a delivered basis, the price of 37% manganese content increased on the week to $3.74/dmtu CIF Tianjin from $3.71/dmtu last week, while the price of 44% manganese content eased to $4.20/dmtu CIF Tianjin, from $4.21/dmtu in the previous week.
In India, manganese alloys prices were little changed due to weak demand from domestic steel makers and for exports. However, chrome alloys jumped sharply, tracking a firmness in domestic e-auction prices.
“Manganese alloys prices remained firm, but there was hardly any indication of an emergence of fresh domestic demand and hardly any export deals materialized,” said an exporter who mainly targets Southeast Asian countries.
Offers for silico-manganese (SiMn) 60-14 from producers in Raipur and Durgapur region were heard in the range of INR64,000-65,000/t, as of 29 January, compared with INR63,400-64,500/t on 22 January.
Offers from Visakhapatnam firmed up during the week to around INR65,000-65,100, from INR64,900/t in the previous week.
There were no confirmed export deals reported for SiMn during the week and offers too remained nearly unchanged from the previous week.
For the 65-16 grade, offers were heard at around $910-920/t FOB, narrower than the previous week’s $910-930/t FOB. Export offers for 60-14 grades were heard at around $800-820/t FOB, unchanged from the previous week.
Domestic prices for ferro-manganese (FeMn), with 70% carbon content, in Durgapur and Raipur remained nearly unchanged for the third consecutive week at around INR64,500-65,000/t.
Offers for FeMn with 75% carbon content were heard at around INR71,000/t.
Export offers for 75% carbon content FeMn were heard at around $870-890/t FOB.
Ferro-chrome (FeCr) offers in the domestic market jumped sharply during the week, tracking a firmness in chrome ore prices in the e-auctions conducted by India’s leading chrome ore mine - OMC.
Domestic prices as on 29 January were heard in the range of INR120,000-121,000/t ($1,443.67-1,455.70/t), against around INR112,000-113,000/t ($1,347.42-1,359.45/t) on 22 January, while export offers firmed up by around INR5,000/t ($60.15/t), from the previous week’s INR100,000-102,000/t.
OMC had offered 45,200 t of various grades of chrome ore from its two mines – South Kaliapani and Sukrangi - in January e-auctions, which were met with a strong demand.
“Because of aggressive bidding for mid and lower grades of ores, the average realized price in OMC’s latest auctions jumped by around 15% compared to previous prices,” said a market source.
According to a source, the bid price for 15,900 t of ore with chrome content of 44-46% and 46-48% from OMC’s South Kaliapani mine rose to INR24,145/t ($290.48/t) and INR25,070/t ($301.61/t) respectively, compared with the base price of INR18,145/t ($218.29/t) and INR18,970/t ($228.22/t).
This was an increase of 19-20% above the bid price of INR20,193 ($242.93) and INR21,102/t ($253.87/t) respectively for the similar material in the previous auction held in December.
Prices of 20,000 t of below 40% chrome content ore from the same mine jumped 29% to INR11,472/t ($138.01/t), compared with INR8,862/t ($106.61/t) in the previous auction.
Bids for a small quantity of 1,200 t of 42-52% ore content from Sukrangi mine ranged between INR21,620-26,619/t ($260.10-320.24/t).
This reflected a premium ranging between 25-29% over the base price and an increase of 11-13% compared with prices fetched in the previous month’s auctions.
In all, OMC had offered 24,000 t of ore with grade ranging between 40-54% and another 20,000t of below 40% grade from South Kaliapani mine. The remaining 1,200 t of 42-52% grade was offered from Sukrangi mine.
Meanwhile, OMC, India’s leading miner on 22 January invited expression of interest (EoI) from end-users located within the state of Odish for sale of iron ore, chrome ore and bauxite on a long term basis (5 years).
End-users with their plants located within the state have been asked to submit their interest by 31 January.
South African manganese ore prices continued to rally to the highest level in months, while Indian ferroalloys prices for exports and domestic markets remained stable.
South Africa’s price of 37% manganese content rose to $2.91/dmtu, up from $2.87/dmtu in the previous week and the highest since mid-August.
On a delivered basis, the price of South Africa’s 37% manganese content rose on the week to $3.71/dmtu CIF Tianjin, from $3.68/dmtu last week and the highest since late June.
Prices of 44% manganese content ore eased to $4.21/dmtu CIF Tianjin from $4.23/dmtu a week earlier.
In the ferroalloys markets, Indian domestic prices were little changed, while export offers edged up on freight volatility and a stronger dollar.
Offers for silico-manganese (SiMn) 60-14 from producers in Raipur and Durgapur region were heard in the range of INR63,400-64,500/t ($762.74-775.98/t), as of 22 January, compared with INR63,500-64,500/t ($763.95-775.98/t) on 15 January.
Offers from Visakhapatnam eased by around INR100/t ($1.20/t) during the week to around INR64,900/t ($780.79/t).There were no confirmed export deals reported for SiMn during the week but offers firmed up.
For 65-16 grade, offers were heard at around $910-930/t FOB, a tad higher from previous week’s $900-920/t FOB. Export offers for 60-14 grades were heard at around $800-820/t FOB, up from $790-810/t FOB.
Domestic prices for ferro-manganese (FeMn), with 70% carbon content, in Durgapur and Raipur remained unchanged for the second consecutive week at around INR64,000-65,000/t ($769.96-781.99/t).
Offers for FeMn with 75% carbon content were heard at around INR71,000/t ($854.18/t).
Export offers for 75% carbon content FeMn were heard at around $880-900/t FOB.
Ferro-chrome (FeCr) offers in the domestic market rose by around INR10,000/t ($120.31/t), supported by limited supplies and higher chrome ore prices. Domestic prices remained higher than export offers. Nearly half of the country’s FeCr production is exported.
Domestic prices as of 22 January were heard in the range of INR112,000-113,000/t ($1,347.43-1,359.46/t), against around INR112,000/t ($1,347.43/t) on 15 January, while export offers ranged between INR100,000-102,000/t ($1,203.07-1,227.13/t).
The domestic FeCr market has been relatively strong over the past couple of months.
FeCr producers with their own captive chrome ore mines are making profits to the tune of INR30,000-45,000/t ($360.92-541.38/t), while most producers of manganese alloys are barely breaking even, market sources said.
“I don’t think that sustained high price of FeCr witnessed in the last 6-12 months was ever seen in the past 20-25 years,” said one producer.
A trader echoed this, saying he hasn’t seen chrome alloys selling at a INR49,000/t premium to manganese alloys. He said typically FeCr sells at a much smaller INR4,000-5,000/t premium to manganese alloys.
The picture however is different in Europe where poor market conditions have forced Finland’s Outokumpu to reduce its ferro-chrome production until at least August.
“The temporary closure of one ferrochrome furnace and one sintering plan is a difficult but necessary measure in this market situation,” said Martti Sassi, president of Outokumpu’s ferrochrome business.
The company produced 430,000 t of ferrochrome in its financial year 2022. Outokumpu operates the Kemi mine, the only chrome mine in the European Union.
Ferrochrome is an alloy between chromium and iron and is an essential raw material in the production of stainless steel.
South32’s manganese ore production in South Africa rose 2% on the year in the first half of its financial year, while sale increased by 5%.
South32 produced 1.11 mt of manganese ore in the December 2023 half year, up from 1.09 mt. Sales rose to 1.08 mt from 1.03 mt, following the end of the maintenance period at its Mamatwan mine, the company said in its latest quarterly results on Monday.
The miner’s production guidance for FY2023/24 remained unchanged at 2.00 mt, down from 2.11 mt in financial year ending 30 June 2023.
South32’s realised price for its South African manganese ore was $3.03/dmtu FOB, down 15% from $3.57/dmtu a year ago. Its average ore grade was 38.7% manganese content in the first half, compared to 39.2% a year ago.
Its Australian manganese ore production fell 9% to 1.68 mt, “as PC02 output declined due to lower yields”. Sales rose 13% to 1.86 mt in the first half due to increased road haulage capacity.
FY23/24 production remained unchanged at 3.40 mt, down from 3.55 mt last year.
South32’s realised price for its Australian manganese ore was $3.79/dmtu FOB, down 17% from $4.57/dmtu last year. Its average ore grade was 42.6% manganese content, compared to 44.2% a year ago.
Hlengiwe Motaung
Transnet Freight Rail (TFR) has shut the main rail line to South Africa’s Richards Bay Coal Terminal (RBCT) following the collision of two trains on Sunday morning.
"Train 4831 collided with train 4623 that was standing at Elubana due to the Eskom Power outage in the Richards Bay area, resulting in both trains derailing," stated a notice given to TFR clients.
A source expected the line, which was running last week at a rate of around 1.5 mt a week, will remain closed for up to five days. RBCT stocks were estimated at 3.55 mt.
Transnet told shareholders that 215 metres of rail were damaged on both lines.
The rail operator said it would use this shutdown to also conduct some maintenance work.
“Richards Bay, Vyrheid, Ermela and Pyramid rail network depots will cover all the work that was planned for the next double line and also use this down time to deal with the long outstanding faults,” Transnet said.
The accident comes just as Transnet’s railings to RBCT were improving, following the lowest volume of coal shipments in more than three decades. (see story below)
RBCT reported a sharp jump in monthly exports to 5.33 mt in December, up from 3.43 mt in November and the highest for at least two years.
Last month, Transnet added seven new locomotives to its North Corridor, which links Mpumalanga coal mines with RBCT.
“We are currently running on an average of 25 trains a day and the goal is to return to 30 trains,” said a Transnet official before the derailment.
The ongoing rail issues have forced coal exporters to rely more on trucks to transport their supplies to non-RBCT ports, such as Transnet’s Richards Bay dry bulk terminals and Mozambique’s Maputo port. That has caused severe road congestion outside these ports.
Transnet Port Terminal (TPT) said last week that one of its three conveyor belts at its Richards Bay dry bulk terminal returned to operation, boosting coal deliveries and reducing truck demand by as much as 400 vehicles per day. The conveyor belts were damaged by a major fire in October 2021.
“This will improve vessel turnaround time and reduce truck traffic at the Terminal,” the official said. TPT did not disclose when the other two conveyor belts would be repaired.
TPT also announced it had resumed accepting coal trucks at its Richards Bay dry bulk terminal after a temporary nine-day pause, which was implemented to accommodate the increased traffic during the holiday season.
Although trucks were starting to move through the N2 from the Mpumalanga coal fields, only trucks with vessel nominations were currently accepted, a Richards Bay port terminal official told McCloskey.
“The congestion is back and continues to cause delays for us,” a source from a shipping agency told McCloskey. “This port is not designed to take 500 trucks a day. The congestion delays our ships. It usually takes us about four days to load a (Panamax) vessel but these delays have added three more days to the process.”
The agency says it now loads between 100,000-500,000 t of coal a month, compared to about 1 mt a month before the congestion.
In November, TPT imposed a temporary suspension on new vessel nominations at its Richards Bay dry bulk ports to ease the road congestion in the area.
South Africa’s power minister defended the country’s plan to extend the life of Eskom’s coal-fired power plants, saying the action is necessary to ensure energy security and economic growth.
The Cabinet has approved an updated energy outlook plan, known as the Integrated Resource Plan (IRP) 2023, which opens the door for delaying the shutdown of its oldest Eskom’s coal-fired power plants by as much as a decade to beyond 2030. The revised IRP is now open for public comment until 23 February.
Eskom’s 14 coal-fired power plants are by far the largest consumer of South African coal, burning 102 mt in FY2022/23. In the six months ending 30 September, its coal plants provided 81% (88 TWh) of the country’s electricity.
“Our articulation and approach on the delayed decommissioning is an admission that the country’s economy will be decimated if we are unable to resolve loadshedding,” Electricity Minister Kgosientsho Ramokgopa told reporters last week.
“In the short term, we want to exploit these assets, we want to sweat these assets, and we also accept that we have obligations to reduce emissions.”
After shutting Eskom’s Komati plant in October 2022, the state utility planned to also close 570 MW Grootvlei, 1.48 GW Camden, 1.10 GW Hendrina, 2.10 GW Arnot and 2.64 GW Kriel by 2030 as part of a Just Energy Transition plan backed by several Western countries.
This timeline is now looking doubtful if Eskom abides by IRP 2023.
Under one long-term scenario outlined by the IRP 2023, the life extension of the five Eskom coal plants by a further decade would ensure the availability of more than 8 GW to the grid by 2050. It would also keep Eskom’s coal demands at around 100 mt/y for the foreseeable future, according to McCloskey calculations.
“The continued exploitation of these assets is making it possible for us to ensure we address and abate the relentless pressure of loadshedding and are able to protect the South African economy,” Ramokgopa said.
The extension of Eskom’s coal-fired plants undermines an agreement reached in 2021 at COP26 to accelerate South Africa’s phase out of coal generation. In the deal, a handful of Western nations agreed to provide an initial $8.5bn in climate financing to South Africa under the world’s first Just Energy Transition Partnership.
“There has to be balance between the ecological, environmental impact and also the socioeconomic impact,” the minister said. “It is an admission that when we elaborate on the just (transition), we do not only focus on the environmental issues, but also the implications for livelihoods, incomes and economic growth.”
Hlengiwe Motaung
South Africa’s updated energy outlook plan looks to delay the shutdown of Eskom’s oldest coal-fired power plants by as much as a decade, while also opening the door for the building of up to 6 GW of clean coal technologies.
The Department of Mineral Resources and Energy last week published the government’s revised long-term energy plan, known as the Integrated Resource Plan (IRP) 2023. The document, approved by Cabinet last month, is now open for public comment until 23 February. It will replace IRP 2019.
The IRP 2023 provides guidance for the country’s energy mix for two time periods: 2023-2030 and 2030-2050.
For 2023-2030, it proposes several interventions to resolve a national energy crisis that it forecasts will remain for several more years.
“Where technically and commercially feasible, delay shutting down coal fired power plants to retain dispatchable capacity,” it said, adding that the life of South Africa’s Koeberg nuclear plant should also be extended.
Eskom’s coal plants are by far the biggest buyers of South African coal, together taking 102 mt in FY2022/23 for its 14 coal plants. They typically consume South African 4,800 kc NAR material.
After shutting its Komati plant in October 2022, the state utility planned to also close 570 MW Grootvlei, 1.48 GW Camden, 1.10 GW Hendrina, 2.10 GW Arnot and 2.64 GW Kriel by 2030 as part of a Just Energy Transition plan backed by several Western countries.
This timeline is now looking doubtful if Eskom abides by IRP 2023.
Under one long-term scenario outlined by the IRP 2023, the life extension of the five Eskom coal plants by a further decade would ensure the availability of more than 8 GW to the grid by 2050. It would also keep Eskom’s coal demands at around 100 mt/y for the foreseeable future, according to McCloskey calculations.
“Delaying shutdown has the lowest new build requirements and adequately maintains security of supply,” it said. “The results indicate that delaying shutdown without retrofit with abatement will result in carbon emissions reaching levels similar to those around year 2026.”
The delayed shutdown is one of five “pathways” outlined by the IRP 2023 for its long-term 2030-2050 horizon.
In another pathway, the document proposes the significant deployment of cleaner coal technologies, including a combination of fluidised bed combustion and pulverised fuel technologies with carbon capture, utilisation, and storage (CCUS).
“This pathway results in the second least build requirements with additional renewable energy, gas, and storage. From security of supply, this pathway is marginally inadequate,” it said.
The IRP considers several other pathways where the South Africa’s energy mix becomes increasingly reliant on renewable energy, while phasing out coal and other fossil fuels.
“In this study period, it is evident that energy pathways based on renewable and clean energy technologies only deliver the desired outcome in so far as decarbonising the power system,” it said. “However, these pathways do not provide security of supply while carrying the highest cost to implement.”
The updated document also called for a resolution to environmental regulations that are threatening to halt operations at non-compliant Eskom coal plants.
Authorities in November 2021 rejected exemptions to minimum emissions standards for Eskom’s 2.88 GW Duvha, 3.56 GW Lethabo, 3.69 GW Matimba, 3.45 GW Matla and 3.60 GW Medupi plants. Eskom has said to properly retrofit its plants to be in full compliance would cost the utility ZAR340bn ($18bn), which it can’t afford.
“Resolving the challenges around compliance…is critical as it will drastically ensure capacity totalling 16,000 MW immediately and up to 30,000 MW in April 2025 is retained,” the IRP 2023 said.
The document has so far received mixed reactions.
Former Eskom CEO Jacob Maroga said the 10-year delay in the shut down of coal plants was the most “prudent option” for South Africa as the country has “little dispatchable capacity in the pipeline”.
“The draft IRP 2023 affirms the emerging global consensus of system operators about system reliability and decarbonisation: slow retirements of dispatchable capacity (until you have alternatives at scale) for reliability whilst adding renewables for decarbonization,” Maroga said on his X account.
Energy expert Chris Yelland called the IRP 2023 a “shoddy piece of work, lacking in maturity and depth”, while retired University of Cape Town professor Anton Eberhard said the document was the “last roll of the dice of a moribund energy system”.
Global output of manganese ore rose 1% in 2023 to 21.1 mt Mn contained, driven by higher production in South Africa, India and Brazil, according to the International Manganese Institute (IMnI).
South Africa increased production by 9% year-on-year, India (+3%), Brazil (+35%), Ivory Coast (+3%) and Malaysia (+63%), which together offset production cuts in Gabon (-13%) due to train disruptions in the first quarter.
South Africa accounted for 41% of the global manganese ore supply, up from 40% in 2022, followed by Gabon (19%) and Australia (14%), IMnI said.
High grade manganese ore production (>44% Mn) fell to 4.5 mt from 4.9 mt Mn contained, representing 21% of total 2023 output. Mid-grade ore (40-44% Mn) eased to 4.2 mt from 4.4 mt, accounting for 20% of total output.
Lower mid-grade ore (30-40% Mn) rose to 10.1 mt from 9.3. mt Mn contained, representing 48% of total production, while low grade ore (<30% Mn) steadied above 2 mt, accounting for 11%.
“2023 was a challenging year for the manganese industry, marked by elevated power prices combined with slowing steel demand in many countries, headwinds in the real estate market in China, the war between Russia and Ukraine still heavily impacting Privat’s manganese mines and smelters, and general cost inflation in many countries,” said IMnI Chairman Patrick SACCO, who is also managing director of Assore International Holdings.
Global silico-manganese (SiMn) production surged 11% in 2023 to around 17.9 mt due to increased Chinese output.
Around 1.7 mt of SiMn supply was added in 2023 amid a 19% increase in China, 2% in India, 14% in Malaysia and 28% in South Korea. That offset supply cuts in Europe (-20%), the Americas (-12%) and Africa (-20%).
China’s production represented 71% of global supply, up from 63% in 2022. India’s supply accounted for 12%.
“China’s output rebounded in 2023 after contracting for the first time in many years in 2022, supported by restocking by steelmakers, the Chinese government the future SiMn market,” IMnI said.
Ukraine, which had been the third largest SiMn producer, has seen its production nearly halved due to its war with Russia.
For high-carbon ferro-manganese (HC FeMn), global output rose 1% in 2023 to 3.8 mt amid moderate growth in Asia and the Middle East. China accounted for nearly 40% of global supply, while India represented 25% of HC FeMn.
Global production of refined ferro-manganese (Ref FeMn) fell 10% to 1.4 mt in 2023 due to lower output in Asia, the CIS (Commonwealth of Independent States), and the Americas. China represented 42% of global supply, followed by Norway at 15% and India at 9%.
Manganese metal production surged 57% to 1.24 mt, as China expanded output by 68% from the previous year. China accounts for 93% of total global supply.
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