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Logistics a weak link in South Africa’s coal value chain

LYONELL FLISS Someone at private or government level needs to coordinate stakeholder efforts

READY FOR DISPATCH Coal sits in freight wagons ahead of transportation at the Transnet rail depot in Ermelo, Mpumalanga

Photo by Bloomberg

EXPORT BOUND A train carries coal set for export into the Richards Bay Coal Terminal, in KwaZulu-Natal

1st February 2019

By: Tracy Hancock

Creamer Media Contributing Editor

     

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There needs to be greater impetus on improving the infrastructure that transports coal for domestic use and for export in South Africa. One way of doing so is by dealing with the overuse of road transport and coordinating the logistics of junior miners, which contribute to inefficient coal logistics, says LogiMan associate director of technology Lyonell Fliss.

He says modern solutions and technologies, and the data to realise improved coal logistics efficiency, especially in new coal basins, already exist in South Africa, but that major coal consumers, State-owned Transnet Freight Rail (TFR) and the private-sector-owned Richards Bay Export Terminal (RBCT) need to join forces instead of striking individual agreements.

“Someone at private or government level needs to coordinate stakeholder efforts. We need a leader with experience and initiative.”

Fliss explains that the current logistics system of the coal mining industry is outdated and inefficient for the delivery of coal to State-owned power utility Eskom and for export, owing to the development of the mining industry over about 60 years, mainly in the Mpumalanga coal basin, having been driven by mine owners’ narrow interests instead of collaboration on common interests.

LogiMan and engineering consulting firm LMAi chairperson Sharadh Padayachi say South Africa’s coal logistics system should be analysed countrywide and viewed as a Big Data project to identify the optimal trends that will lead to coordinated, improved efficiencies. Once these efficiencies have been identified, it will be significantly easier to bring in all the coal producers and players in a mutually beneficial way.

“We know that the coal mining process plants and TFR have volumes of data, required by law, as well as per their operational manage- ment requirements. From the raw data, it is possible to identify the key efficiencies and inefficiencies of the coal plant, Transnet operations and the interaction between the two,” says Padayachi.

He adds that, through Big Data and an understanding of artificial intelligence in the mining industry, it is now possible to quantify the complex relationship across the country and thereby improve the performance of coal logistics using minimal expenditure.

“Once this is achieved, thoughts of expansion can start. We may be pleasantly surprised to find that capacity hidden through inefficiency may be our saving grace in the short term to offset the growing liabilities at the large State-owned enterprises that are most closely linked to the coal industry,” Padayachi states.

Fliss highlights that efficiency improvement solutions for logistics should be based on reducing the amount of road-based coal transport by increasing rail and overland conveyor transport.

Coal miner Wescoal CEO Waheed Sulaiman agrees, noting that, compared with road, the increased use of rail to transport coal would be more cost effective and efficient for South Africa.

Wescoal supplies about four-million tons of coal to Eskom, with most of this coal taking costly road trips to power stations.

In view of concerns about trucking coal to power stations, the Eskom Coal Logistics Strategy was initiated in 2008 to move bulk fuel transport from road to rail, with the electricity utility committing to transporting 32-million tons of coal a year by rail by 2018.

However, in a September 2015 presentation, then Eskom road logistics head Nico Singh reported that 60% of its coal was transported by conveyor; 30%, or 40-million tons, by road; and 10%, or 13-million tons, by rail. At the time, the utility stated that transporting coal to power stations was costly and “socially unacceptable”.

However, in 2015, owing to several factors, Eskom expected rail capacity to decrease from 32-million tons to 23.6-million tons by 2018.

According to its 2018 integrated report, the utility fell short of its target for 2017/18 of 12.9-million additional tons transported by rail, transporting only 11.6-million additional tons, and buying 115-million tons of coal during the period.

Eskom says hauling coal by rail did not meet the annual target, owing to TFR’s several infrastructure failures, with the Camden power station’s rail service stopped to achieve cost savings.

Eskom is targeting an additional tonnage of 64.4-million tons by rail by 2022/23.

Wescoal has sidings in place at its collieries to supply coal to Eskom. However, Sulaiman says the issue of whether Eskom has sidings close to its power stations has not come up in discussions with the utility. Wescoal supplies coal to Eskom from its Elandspruit and Vanggatfontein collieries, near Middelburg and Delmas respectively, in Mpumalanga, using road and rail, with the mode of transport dictated by Eskom.

Using a conveyor to transport coal from its Khanyisa colliery, near Ogies, also in Mpumalanga, to the Khusile power station could be an option, says Sulaiman, but Khanyisa does not have a supply contract with Eskom.

Further, he notes that the means by which the coal is transported to power stations is dictated by Eskom, as the utility bears the cost of transport.

Fliss stresses that the high cost of transporting coal by road contributes to the increase in the electricity price for every kilowatt hour, even in a country with vast reserves of coal; previously, South Africa had one of the world’s lowest electricity prices.

This favourable electricity tariff created conditions conducive to the development of energy-intensive industries, such as aluminium smelters, but the current high price “is discouraging such investments and is making these industries uncompetitive”, states Fliss. He also suggests that Eskom reduce coal double-handling at power station stockyards by employing bunkers and conveyors instead of the front-end loaders used at present.

Coal trucks in certain areas of intensive coal mining and power generation further contribute to pollution and the deterioration of South Africa’s roads, he emphasises.

Eskom also states in its 2018 integrated report that it regularly engages with local authorities on the large number of trucks transporting coal and their contribution to the deterioration of road conditions in Mpumalanga, as well as road safety.

Fliss adds that the entry of junior miners, with little experience in the coal mining value chain, particularly beneficiation and logistics, is also to blame for the country’s inefficient coal logistics. He recommends the clustering of junior miner operations and the sharing of beneficiation plants to improve the efficiency of the logistics.

To tackle South Africa’s coal logistics ineffi- ciencies, Fliss suggests the development of a masterplan involving the overland conveying of coal to inland terminals for processing prior to rapid railing to ocean terminals, especially for new coal basins, to boost efficiencies, cut costs, ensure economi- cally feasible junior-miner participation and bring bulk-commodity management into the twenty-first century. However, neither Eskom nor TFR has shown any interest in such a plan.

He emphasises that masterplanning is critical for future large coal-mining developments, such as those in the Waterberg basin, in South Africa’s Limpopo province, and in neighbouring Botswana basins. “This should not be neglected, as we may fall into the trap of repeating outdated practices. Thereafter, it will be costlier and more difficult to revert to modern concepts such as inland terminals and advanced technology,” he tells Mining Weekly.

Fliss says new operations in these regions should share logistics and beneficiation facili- ties using the most advanced technology, while the infrastructure should be developed according to a masterplan approved by all the major players.

The masterplan should include mine stockyards and load-out stations; inland terminals, including beneficiation plants; transport infrastructure, excluding road transport, such as rail and overland conveyors; and consumer stockyards, he adds.

The creation of inland coal terminals for export, he explains, is applicable to large coal mining developments, channelling the products of several mines in a certain area to a central hub to be beneficiated, stacked and distributed to various consumers.

The benefits of inland terminals include economical beneficiation, as one beneficiation plant is shared by several users; uniform and better quality control of beneficiated product; the possibility of using economic belt conveyors within the area covered by one inland terminal, reducing rail and road transport; the elimination of individual load-out stations; and the integration of clustered junior miners, exposing them to the export market.

The conventional logistics system is based on transporting coal directly from each mine’s beneficiation plant to consumers. Fliss says a masterplan would eliminate stumbling blocks in the conventional systems and reduce the double-handling of coal at individual mines and collection points.

Using inland terminals on the export line to ocean terminals will eliminate expensive and time-consuming large marshalling yards and loops, says Fliss, noting that there are several ownership and management options for such terminals.

Currently, exporting coal from South Africa is based on TFR working in a fully integrated supply chain with the RBCT, in KwaZulu-Natal.

Of Wescoal’s eight-million-ton coal production, about one-million tons is exported through traders, with most of the coal leaving through the RBCT, which remains “the most efficient port for exports in the country”, says Fliss.

However, Sulaiman says not all sidings in South Africa are equally developed. “At the RBCT, a certain length and weight of train is used because it is more efficient. But not all the sidings in the country have been developed to accommodate wagons of this loading capacity. Therefore, these sidings are inefficient for the export channel. The modification of these sidings would ensure optimisation of the export channel.”

He notes that TFR may not be able to upgrade the sidings because of budgetary constraints, although such upgrades could be funded by the operators of sidings if the investment were to make financial sense.

Sulaiman believes that improving other points of export, such as the Grindrod Terminal, in Richards Bay, and the Durban multicargo port, would enable more junior miners to grow, which, in turn, would be beneficial for the economy.

The RBCT is owned by the 16 coal mining companies that use it, and they are entitled to the bulk of the capacity of the terminal. In 2004, the RBCT started the Quattro process, whereby smaller mining companies are allocated export capacity at the terminal. This capacity, according to the RBCT’s website, is four-million tons a year.

To improve exports by smaller mining companies, Sulaiman suggests the RBCT review the process to make more capacity available for junior miners.

Padayachi concludes that the impact of coal logistics inefficiencies has brought manufacturing, mining, job creation, infrastructure growth and the education of the country’s youth to its knees at times. “The knock-on effect from sector to sector has been devastating. Electrical energy has been one of the key drivers for industrial growth. This inefficiency in the supply of coal has certainly impacted on us all in a manner that is most painful.”

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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