South Africa’s coal miners struggle to cash in on Russia sanctions

Growing demand from customers for coal must be a boon for South Africa’s miners but numerous simply cannot acquire benefit of Europe’s search for alternate options to Russian gasoline because of the parlous state of the country’s infrastructure.

Costs for South Africa’s benchmark export quality coal have doubled considering that the start off of the 12 months as European nations invest in up alternate resources of coal ahead of a EU ban on Russian imports afterwards this yr as element of Ukraine war sanctions. The EU will also permit extra burning of the fossil gasoline to substitute Russian oil and gas in decades to occur.

But significant theft of copper cable and a scarcity of trains owing to corruption less than Jacob Zuma, the previous president who resigned below a cloud of scandal in 2018, have induced problems for Transnet, the point out freight operator. “We are just not ready to satisfy our contractual obligations in terms of volumes of coal that [miners] ought to move”, Portia Derby, main govt of Transnet, told the Economical Moments.

“It’s taking place all about the world — provide chains are currently being stretched,” Bevan Jones, main government of African Supply Markets stated. But South Africa has “scored a pair of possess goals due to the fact of Transnet and the rail line”.

South African coal is a appropriate substitute for Russian coal, Jones stated, but the nation exported just 2.9mn tonnes to Europe final month. At that level the year’s full could be no a lot more than 40mn tonnes, reported coal analyst Xavier Prévost of XMP Consulting. South Africa exported 58mn tonnes by the coal terminal at Richards Bay previous year, the most affordable due to the fact the 1990s and properly down below capability. The rail line from the mining town of Ermelo to Richards Bay can carry 77mn tonnes and the port can maintain 91mn tonnes.

South Africa’s mineral council has claimed that mining providers dropped out on 35bn rand or in excess of $2bn in earnings final yr mainly because they could not transportation bulk commodities these types of as coal that they had contracted to sell. “It does not make sense why one entity is costing the country so a lot,” mentioned Mesela Nhlapo, main executive of the African Rail Business Association, referring to Transnet.

Transnet claims it is carrying out everything it can to restore operations. “About 80 for every cent of our earnings arrives from the mining sector, and of that, a enormous part of our profitability arrives from coal — so it is in our interest to move coal,” Derby said.

The freight operator is also limited of coal trains, a immediate legacy of the systematic looting of government sources regarded as ‘state capture’ underneath Zuma, prior to he was ousted and replaced as president by Cyril Ramaphosa.

For the duration of Zuma’s presidency, Transnet agreed to pay back 54bn rand for additional than 1,000 locomotives from Chinese and western suppliers. The deal was overpriced and riddled with kickbacks, according to a judicial inquiry, and approximately a ten years afterwards only about fifty percent of the trains have been sent. “It is basically coal that is most affected” by these practice shortages mainly because of the require for specialised rolling stock, Derby claimed.

South African miners this kind of as Exxaro and Thungela, the spin-off of Anglo American’s previous regional coal operations, have turned down Transnet’s declaration of pressure majeure. They are in conversations with the operator to uncover a answer.

There are number of transportation alternatives for exporters. “Trying to find a truck now any place is an situation. They’re like hen’s tooth at the minute. It’s outrageous,” said Jones.

European sanctions on Russia could enable other African coal-making international locations. This 7 days a port in Mozambique received coal from landlocked Botswana that was destined for Europe, a milestone for a new export route, reported Grindrod, the terminal operator. Coal from Botswana is also getting trucked to ports in Namibia, analysts claimed.

Even with the want to substitute Russian coal in the brief phrase, Europe is nonetheless shifting from fossil fuels in the very long run. That indicates this year’s hurry to acquire South Africa’s coal will not past and the upcoming of its exports lies in Asia, Jones stated. But the surge has underlined that decarbonisation will not be uncomplicated in possibly Europe or Africa.

Previous yr European countries joined the US and Uk to pledge $8.5bn in funding for renewables in South Africa in return for rushing up its plans to phase out coal. The war in Ukraine has difficult that transition. “It is tremendous hypocritical of Europe to say we want your coal, but you guys should really be decarbonising,” Jones explained.