Premium iron ore piles up in South Africa amid rail constraints

Image courtesy of Transnet
Anglo American Plc’s South African iron ore division said mining operations continue to build upinventories of high-quality iron ore as rail and port bottlenecks hamper the supply of steel components.

South Africa’s national railway company, Transnet SOC Ltd., is suffering from capacity bottlenecks,exacerbated bymaintenance backlogs and vandalism. The shortage, which has also affected other shipperssuch as coal producers, has ledto Kumba Iron Ore Ltd. stockpiling high-grade iron ore, including the largeSishen open pit mine in South Africa’sNorthern Cape province.

In a statement on Tuesday, Mr Kumba said iron ore stocks had risen to 7.8 million tonnes by Dec. 31 from6.1 milliontonnes a year earlier due to rail restrictions. Poor logistical performance at Transnet, includingworkers’ strikes in 2022,has caused the amount of ore shipped to ports to fall by 9% to 35.9 milliontonnes, the miner said.

Kumba Chief Executive Officer Mpumi Zikalala said: “Labour strikes, equipment failures and locustinfestations havereduced the railway’s performance to 80.3% of his contracted tonnage.”

Kumba’s misfortune came at a time when demand for high-value iron ore remained strong. Continuedstrong demand inEurope and China resulted in an average price of $113 per ton, 13 points above thereference price.

The Anglo division said it would adjust its production outlook for the next three years “to reflect Transnet’sexpecteddecline in rail performance given the challenges of 2022″. This year’s production has remainedat 37 million tonnes fromHe’s 35 million due to inventory adjustments. As rail performance improves,production could increase by 5% in 2024 and2025 in year 6.

(Felix Nizhny)