'The losses are enormous': Mpumalanga shutdown hits coal, chrome exporters

8th July 2022

By: News24Wire


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Blockaded roads and disruption of transport routes associated with the Mpumalanga shutdown have served to twist the knife in commodity exporters already struggling to move product out of the country.

A shutdown campaign gripped Mpumalanga on Wednesday when taxi and truck drivers blockaded critical transport routes, and even offloaded tonnages of coal onto highways, in protest of escalating fuel prices. On Thursday, disruptions spread to the R34 connecting Richards Bay and Empangeni.

The fuel price trajectory is likely to continue for a while still as oil prices remain high at over $100 a barrel on supply concerns, while the rand remains weak, having hit a 20-month low on Tuesday. The government has also announced the staggered reinstatement of the fuel levy, which it had cut in recent months to give consumers a reprieve.

Chrome producers on the Eastern Limb of the Bushveld complex felt the impact. Samancor Chrome said logistical planning, execution, and associated expenses were affected. However, the company has contingency plans in place to try to mitigate such unplanned and unexpected blockades on its major exporting routes. "As such, we are not able to quantify the current situation’s impact in its totality," the company told Fin24.

The blockades were highly disruptive for coal producers too, who have traditionally exported through the Richards Bay Coal Terminal, but severe railing issues over the past two years have caused them to clamber for capacity at alternative ports to take advantage of exceptionally high prices of close to $400 a ton currently.

There is little spare capacity to speak of, and Maputo is virtually the only viable alternative to traditional routes to evacuate coal and other commodities out of the country. The Port of Richards Bay is another alternative, but exports through this port have tended to face delays.

While trucking from the coal heartland of Mpumalanga to Mozambique is costly, current coal prices make the endeavour economic for many miners – even with fuel prices as high as they are.

"These kinds of delays are scary, economically very scary, because the ripple effects are huge," said Barbara Mommen, trade and transport corridor consultant at Coalescence.

Because of Transnet rail’s unreliability, and challenges at ports like Durban and Richards Bay, a great deal of cargo has been moving along the Maputo corridor of late. Mommen conservatively estimates 1 500 tipper trucks carrying up to 35 tons of coal or chrome move through the corridor each day, although last month the numbers were closer to 1 900 trucks, she noted.

For fleet operators, "the losses are enormous," Mommen said. "If you have a fleet of 180 vehicles standing at a cost of, conservatively, R5 500 per hour – the sums do not look pretty."

Menar, a coal producer, said its transporter's trucks entering the Richards Bay Harbour on Thursday faced delays and one truck transporting Menar's coal was forced to block the road at gunpoint.

"Besides the trauma the driver experiences, it poses a risk to the asset and public safety. Fortunately, the driver was unharmed, and the truck arrived safely at the port," the company told Fin24. "There has been no direct impact on our volumes to port."

CEO of the Road Freight Association, Gavin Kelly, said the involvement of trucks in the blockades was not an industry action. He noted there are many reports that drivers were approached by armed individuals and forced to block roads, although these are yet to be verified. He said it was too soon to tally the disruptions' financial impact.

Also at stake is the ability of the mines and the producers to honour their contracts. "And to lose two full days, which it seems they have, then creates a huge issue," Mommen said.

The more significant consideration is the unreliability and unpredictability of supply chains in Africa as perceived and experienced by international customers. "This kind of thing just undermines all the work that people are doing to ensure that they retain contracts, that they're efficient, that they're competitive. Because these are pretty, mercenary international markets, and really what they want is a security of supply."

With the disruptions seeming to have ended after two days, exporters may still be able to make their orders provided there is sufficient volume at the port to be loaded. If a ship is forced to wait for cargo, Mommen says exporters face a demurrage fee of up to $70 000 (about R1.17 million) per day.

Port sources told Fin24 there appeared to be no supply issues at the Maputo port at this stage.

Traffic was flowing again on Friday after government took "rapid action" to stop president Cyril Ramaphosa’s adviser Sydney Mufamadi told Business Day.

The industry won’t be relaxing just yet, however.

On Thursday, the South African Federation of Trade Unions warned of plans to organise a "national shutdown" in August to protest against the ongoing crisis at Eskom, the rising cost of living, and high levels of unemployment. 

Edited by News24Wire




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