23 July 2024
South Africa's Transnet is set to receive a ZAR18.85bn ($1bn) corporate loan from the African Development Bank, providing much needed funding for the troubled state-run company to improve its rail operations.
The 25-year loan fully guaranteed by the government of South Africa was approved by the bank's board of directors earlier this month.
"The loan extended by the bank will make a significant contribution to Transnet’s capital investment plan to stabilise and improve the rail network and to contribute to the broader South African economy, “said Transnet CEO Michelle Phillips.
Last year, Transnet sought more than ZAR100bn ($5.3bn) from the Treasury to settle its ZAR61bn ($3.2bn) debt and a ZAR41bn ($2.5bn) equity injection or a subordinated loan that can be converted to equity to deal with its dilapidating infrastructure, idle locomotives, theft and vandalism that hampered shipments of coal and other minerals.
South Africa's Finance Minister Enoch Godongwana agreed to only inject funds into the SOE after it presented a roadmap for a recovery plan.
Transnet’s turnaround plan also includes increasing shipments on the main iron ore line to 66 mt from 61.5 mt last year.
"Our partnership will enable Transnet to execute a comprehensive Recovery Plan (RP), addressing operational inefficiencies, particularly in rail and port sectors," said The African Development Bank’s Vice President for Private Sector, Infrastructure and Industrialisation Solomon Quaynor.
“It will facilitate the first phase of the company’s ZAR 152.8bn ($8.1 bn) five-year capital investment plan to improve its existing capacity ahead of expansion for the priority segments throughout the transport value chain,” said the African Development Bank Group.
16 July 2024
Global manganese markets could rebound this week, supported by the shutdown of a key South African export rail line.
Transnet last Friday suspended all rail operations on the Cape Corridor, connecting South Africa’s manganese mines in the Northern Cape to the ports of Gqeberha (Port Elizabeth) and Ngqura, due to damage caused by severe weather.
“The rail formation has been swept away, resulting in major damage to the infrastructure and overhead equipment,” Transnet said in a statement.
On Monday, Transnet and industry officials said the line was still closed. No timeline was given on when operations would resume.
If the rail line is shut for a prolonged period, it could spark a further price rally in global markets, traders said.
After the doubling in prices following the halt in GEMCO exports last March, manganese prices are coming under renewed pressure from weak ferroalloys demand.
High-grade manganese material eased to $8.85/dmtu CIF Tianjin in the week ending on 12 July, down from $8.98/dmtu in the previous week and snapping a three-week rally, according to market sources.
Lower-grade semi-carbonate material continued to fall with 36.5% manganese slipping to $5.18/dmtu from $5.36/dmtu in the previous week. The market has fallen for five straight weeks, dropping 19% from 2024’s high of $6.41/dmtu reached in mid-June.
The differential between the two grades widened to minus $3.67/dmtu from minus $3.62/dmtu in the previous week. Before GEMCO’s exports were halted in mid-March, the differential was just minus $0.40/dmtu.
In South Africa, the 36.5% semi-carbonate price dropped to $4.34/dmtu from $4.56/dmtu in the previous week.
For India, CIF offers followed similar lines. Offers for August-September loading higher grades (44% and above) eased to around $9.00/dmtu, from $9.16/dmtu in the previous week and that for 36.5% content eased to $5.25/dmtu, from $5.36/dmtu.
16 July 2024
A provisional import tariff of 9% has been levied on hot-rolled steel coming into South Africa in a bid to protect ArcelorMittal SA (AMSA) from a flood of cheap Chinese imports.
The application for tariff protection was lodged with the government’s International Trade Administration Commission (ITAC) in February by the South African Iron & Steel Institute (SASI) on behalf of AMSA, the country’s main primary steelmaker.
ITAC’s probe into the matter is ongoing but the commission made a preliminary determination that the circumstances are such that a delay in the imposition of a provisional measure would cause damage that would be difficult to repair.
As such, a provisional 9% safe-guard tariff will be levied on imports of hot-rolled steel products for a period of 200 days, pending the finalization of ITAC’s investigation.
This comes on top of an existing 10% import tariff, which is applied to all raw steel imports.
ITAC said it will evaluate public interest considerations of a safeguard duty in the next phase of its investigation.
AMSA has previously enjoyed safeguard duties on hot-rolled steel which were implemented from 2017 to 2020.
Last week, the steelmaker warned its interim losses have skyrocketed due to tough market conditions and severe operational issues in the first half of the year.
AMSA CEO Kobus Verster said the need for market protection is urgent given Chinese integrated mills are selling below their cost to the international market. But the 9% is actually substantially less than what the company hoped for, he said.
“That will bring us still below the protection that other countries are receiving …. In terms of average duties, what we want is what other countries have. And that's about 25%.”
Meanwhile, the downstream steel sector is up in arms over the provisional tariff.
Gerhard Papenfus, CEO of the National Employers’ Association of South Africa (NEASA), said the tariff will undoubtedly result in job losses in the downstream steel sector.
The manufacturing downstream wants the cheapest and best quality of steel from wherever it can be sourced, and the customers want competitively priced goods too, he said. “AMSA is actually a bit of an unwelcome supplier of steel … if you can't compete, then you're not welcome,” he said.
SS Profiling CEO Theunis Duvenage, said the import levies are disastrous for the downstream. “If we look at the list, as long as my arm of people that opposed this, then it's very hard to understand how government would still do this, and even worse, on a temporary basis. The investigation is not even completed,” he said.
“If we want to get the economy growing, steel is key because it is the backbone of industry. And now you make it more expensive …. It just doesn't make sense. … you are making the raw material expensive, and the manufacturing industry becomes uncompetitive.”
Nico van Wyk, marketing manager at Duferco Steel Processing, said AMSA has no competition on hot-rolled steel in South Africa and could not be compared to other markets with higher tariffs.
“In South Africa, we have one mill. So, everyone is essentially forced to talk to AMSA,” he said. “We've always opposed the import protection granted to AMSA because it does not consider competition in South Africa…we are becoming more uncompetitive in the export market and against finished products that are being imported,” van Wyk said.
09 July 2024
President Cyril Ramaphosa’s decision to move the critical energy portfolio out of Gwede Mantashe’s hands to fall under Kgosientsho Ramokgopa has given rise to immense uncertainty and confusion over how energy matters will be split across the two ministries.
Ramaphosa last week revealed his new, larger Cabinet, which seeks to accommodate all parties that make up South Africa’s new Government of National Unity (GNU).
The reappointment of Minister Gwede Mantashe came as no surprise, given the political heft he wields as secretary general of the African National Congress (ANC), but his portfolio has been streamlined from Mineral Resources and Energy to Mineral and Petroleum Resources.
Meanwhile, Kgosientsho Ramokgopa has been appointed minister of the newly merged department on electricity and energy.
Mantashe has vehemently denied he has been demoted in anyway – as had been suggested in local media coverage amid harsh criticism of his performance in his previous portfolio.
Speaking to McCloskey during a telephonic interview, Mantashe said he “loved” the new shape of his portfolio, which will allow him to give petroleum the attention it deserves.
Independent analyst Chris Yelland said the split in responsibilities across the two departments is very unclear.
Mantashe, however, said he had absolute clarity on how the responsibilities would be split, with only electricity-related energy matters falling to Ramokgopa’s department.
But this has stoked confusion among industry. “Where will NERSA [The National Energy Regulator South Africa] go? This cannot work,” said one prominent industry executive.
For now, some industry participants have assumed Ramokgopa will be responsible for a handful of critical tasks to ensure the country’s future energy security.
The Energy Intensive Users Group of SA (EIUG) – which counts major energy users like Anglo American, South32, Sasol, Glencore and Thungela Resources among its members – welcomed the establishment of the Electricity and Energy Ministry "as a policy maker and shareholder for Eskom during this rapidly transforming era".
The group said Ramokgopa will urgently have to ensure that the Electricity Regulations Amendment Bill (ERA) — which establishes the framework for the liberalisation of South Africa’s electricity industry — is signed into law. He will also need to ensure that the Integrated Resources Plan (IRP) 2010-2030 is finalised.
Yelland expects Ramokgopa’s department will be responsible for the first draft of the Integrated Energy Plan (IEP), which must, by law, be produced by 30 March 2025.
The IEP is an overall energy plan for liquid fuels, gas and electricity, and is more detailed than the IRP.
In determining how responsibilities are split across the two ministries, stakeholders said it will also be key to see how the two departments will be resourced.
Private sector participants appear more welcoming of Ramokgopa, who has demonstrated dedication and enthusiasm in his post as minister of electricity.
He has been credited for his key role in addressing rotational power cuts, known as load shedding. Last weekend marked 100 consecutive days without loadshedding, a reprieve last enjoyed in late 2020.
Mantashe meanwhile has been criticised for frustrating the green power rollout and for the generally poor administration of his department, which has facilitated an inordinate backlog in processing mining rights application, serving as a major deterrent to new mining investment in the country.
Mantashe said the critics were not at the coal mines, noting that industry executives were pleased about his reappointment as a minister who understands the sector.
The Minerals Council South Africa CEO, Mzila Mthenjane, said Mantashe’s reappointment “gives continuity” in the engagements and relationship the industry has fostered with him over the years.
Mthenjane also welcomed the separation of the minerals and energy portfolios as it will allow Mantashe to focus on creating the right legislative environment to grow the mining industry.
“A priority for the mining industry in the seventh administration is the need to harmonise the regulatory requirements in various departments to expedite processing of rights to explore, build a mine or expand an existing operation,” Mthenjane said.
Of equal importance is the implementation of the mining cadastre, a digital platform to transparently and efficiently manage mineral right applications and licences, he said.
The Energy and Mining portfolio were previously split but were merged in 2019 under Mantashe, as part of Ramaphosa's first government in a bid to reduce the size of Cabinet and the associated costs.
09 July 2024
ArcelorMittal South Africa (AMSA) has warned of widening interim losses amid tough trading conditions and operational issues at its hot-rolled steel plant.
The steelmaker last week warned earnings losses for the six months ended in June could potentially quadruple as a result of difficult domestic and regional trading conditions; as well as the impact of operational interruptions of the two blast furnaces at flat steel plant in Vanderbijlpark.
Internationally, the market is down and prices are at historically low levels, AMSA CEO Kobus Verster said during a briefing last week. “Margins are under pressure in a normal trading environment,” he said. “In South Africa, demand is really depressed. We are seeing the lowest level of steel consumption probably in the last 10 years.”
Added to that is the operational issues at Vanderbijlpark, where two blast furnaces had to be repaired, and which impacted the group severely in the first half of the year
Two weeks of sales volumes were ultimately lost, but the biggest impact is the cost of restarting the furnaces, Verster said.
AMSA hopes lost volumes from Vanderbijlpark will be recovered in the second half of the year, which is expected to be more reflective of the underlying business performance, the steelmaker said.
Meanwhile, work continues to try to save AMSA’s long steel business, which continues to operate beyond an initially deferred wind-down period, as the company pursues a range of initiatives to secure the division’s long-term sustainability.
The decision to defer the wind down comes amid encouraging signs of growth in the manufacturing sector, as South Africa has now had over 100 consecutive days without rotational power cuts, known as loadshedding.
“Recent increases in power generation, coupled with renewable energy projects scheduled to come online over the next two years, suggest that the drag on economic growth caused by electricity shortages should gradually diminish, facilitating structurally higher production levels,” Verster said.
AMSA said it remained “acutely aware” of the potential impact that closing the longs business would have on the beneficiation and manufacturing value chain, overall industrialization in the country, jobs, and the local economy, particularly in KwaZulu Natal.
An anticipated softening of interest rates in the second half of this year coupled with various trade remedies are likely to provide an improved environment for pricing sentiment, boding well for a gradual recovery in prices, he added.
A key focus for AMSA is now the upgrade and expansion of the national logistics infrastructure and the electrical supply grid, including new renewable energy capacity.
02 July 2024
South African President Cyril Ramaphosa has announced his new Cabinet and reappointed Gwede Mantashe as mines minister, leaving him in charge of overseeing the coal and manganese industries but taking away Eskom from his portfolio.
The new cabinet was eagerly anticipated following the formation of a Government of National Unity (GNU), which includes 11 political parties after the African National Congress lost its long-held majority in the national elections in May.
Ramaphosa late Sunday announced the separation of the mineral resources and energy portfolios, with Mantashe appointed minister of mineral and petroleum resources and Kgosientsho Ramokgopa picked as minister of the newly merged electricity and energy. Ramokgopa will have oversight of the troubled state utility Eskom.
The deputy minister of mineral and petroleum resources is Judith Nemadzinga‐Tshabalala, a member of the ANC and deputy minister of water and sanitation since March 2023. She replaces Nobuhle Nkabane, who has been appointed the minister of higher education.
The deputy minister of electricity and energy is Samantha Graham, a member of the investor-friendly Democratic Alliance (DA).
The DA also secured a post for Dion George as minister of forestry, fisheries and the environment, who will take over from Barbara Creecy. Creecy was appointed minister of transport, overseeing state-run Transnet.
The ANC’s Enoch Godongwana will continue to serve in the critical role of finance minister.
Political parties negotiated cabinet positions for more than two weeks, with reports that the new coalition government was on the verge of collapse due to internal disagreements.
“We have shown that there are no problems that are too difficult or too intractable that they cannot be solved through dialogue,” Ramaphosa said in his Cabinet announcement late Sunday.
Ramaphosa said the incoming government will prioritise rapid, inclusive and sustainable economic growth and tackling poverty and inequality.
“We have had to ensure that the incoming government will be effective, and that it will have people with the experience, skills and capabilities to deliver on its mandate,” he said. “It is important that we deploy into positions of responsibility people who are committed, capable and hard-working, and who have integrity.”
Gwede Mantashe was first appointed minister of mineral resources in 2018 and appointed minister of mineral resources and energy when the portfolios were merged a year later in 2019.
As an ANC stalwart and general secretary, Mantashe wields great power within the party and his reappointment comes as no surprise even amid fierce criticism over his performance as minister.
Mantashe is well-known for his pro-coal stance, which critics say has come at the expense of the renewable energy roll-out which has been frustrated under his watch.
While Mantashe did unlock self-generation of green power when lifting the cap for companies to 100 MW in 2022, he only did so at the behest of Ramaphosa.
In mining, Mantashe has failed to arrest the decline of South Africa’s mineral resources sector, with the country’s share of global mining exploration budgets dropping below 1%. Among the deterrents to investment is the lack of a cadastre - a transparent mining rights database – something which Mantashe’s department only recently finalized a tender for following years of industry frustration.
Business Unity South Africa (Busa) congratulated members of the new Cabinet and assured them of the “unwavering support of business” should they act in the best interests of the country.
Busa CEO designate, Khulekani Mathe, said business hopes to continue working with the government in the public-private partnerships that have reduced load shedding, improved transport and logistics infrastructure and operations, and is strengthening the national capacity to tackle crime and corruption. “Over 130 chief executives have pledged their ongoing commitment to this partnership, which has unlocked infrastructure and operational constraints to inclusive economic growth,” Mathe added.
26 June 2024
South32 is still months away from restarting production at the Groote Eylandt Mining Company (GEMCO) manganese mine in Australia, as the miner continues to deal with the aftermath of Tropical Cyclone Meghan last March, the company’s CEO told McCloskey.
The shutdown of GEMCO, the second largest manganese mine and supplier of half of the world’s high-grade supplies, has led to the near doubling of global manganese prices, making it the best performing commodity in the first half of the year.
South32 indicated in May that it might be able to resume some exports earlier than its targeted January-March 2025 restart, if it can find alternative shipping options. This has sparked widespread debate within the market on when GEMCO shipments will return.
In an interview, Kerr said it was a “way off” to getting the mine back in production due to major flooding at the operation and damage to the nearby port.
The mine in Australia’s Northern Territory operates in a monsoon area where 10 gigalitres of water during the wet season is typical. “Over 36 hours, we went from 10 gigalitres to 38 gigalitres on top of what we'd normally have to deal with,” he said.
The amount of dewatering required is equivalent to pumping a third or so of the water in the Sydney harbour, he noted.
“So, this one in 1,000-year rain event that we had …that's basically washed the pits out and damaged the port. So, it's going take us awhile to basically de-water and repair the actual wharf back to what it was. That’s why we talk about the first quarter of next year,” Kerr said.
“If we managed to get the dewatering done at a quicker rate, we might look at potential small shipments coming out. But we're way off being able to say that's a possibility, the primary focus is on dewatering the pits.”
South32 remained committed to restoring operations at GEMCO, despite the costs of repairs and the mine nearing its end of life.
“It still makes sense every single day of the week to do it,” said Kerr. “The cost curve is quite shaped in manganese, which means the cost of production is quite variable. GEMCO is right down at the bottom, because it’s so close to the port (10km away) and so close to the customer (being the closest port to China).”
South32’s manganese business consists of a 60% stake in the Samancor manganese joint venture, which includes GEMCO and South Africa’s Mamatwan and Hotazel mines. Anglo American owns the remaining 40%.
Opportunities in South Africa
With GEMCO pushing global prices higher, South32 sees opportunities for its manganese mines in South Africa, which are on track to deliver near record production.
“They are looking at the opportunities to maximise what they can get out of the business at the moment. But obviously, in a way that's not unsustainable for the business long term,” Kerr said.
As South32 has recently sold off its met coal business and declared a plan to sharpen its focus on base metals, the group remains keen on manganese.
This, Kerr said, is evident in plans to restore GEMCO as well as its interest in a potential manganese project in the US, where the commodity has a future development use in battery technology, particularly electric vehicles.
In South Africa, South32 continues to assess options to extend the life of mine at its Mamatwan manganese mine and to even double production capacity at its rich underground Wessels mine.
Such a development will however depend on Transnet’s ability to support Wessels with the requisite rail and port capacity.
Currently both are constrained, but high manganese prices have incentivised industry players to truck ore by road to ports as far flung as Richards Bay and even Luderitz in neighbouring Namibia.
Kerr is hopeful that a turnaround plan for Transnet will yield results, with some improvements in the day-to-day already visible, he said.
But far from expanding, South32 and other majors have been set back when, last year, Transnet transferred a 15% discretionary railing allocation away from the majors, awarding it instead to junior miners.
“The junior players tend to come and go, whereas we've been the backbone,” said Kerr. “We would have preferred for Transnet to continue to expand the network to create the opportunities for the 15% without taking 15% of our business away.”
While the juniors are not yet making use of the allocation, rocketing manganese prices may soon see them doing so.
Kerr said South32 would be open to acquiring Anglo’s minority stake in the Samancor manganese joint venture, should it come up for sale amid Anglo’s own portfolio shakeup.
This would include stakes in the northern cape mines as well as GEMCO. The shuttered metalloys smelter in Johannesburg is no longer part of the package following a recent sales deal which is subject to conditions precedent.
“But we already run [Samancor] today, so we're not going to pay a control premium for something we already run. But we do like the business,” Kerr said.
South32’s South African mines are located in the Kalahari basin which, although rich in high-grade manganese, is much further flung from markets than GEMCO (which moves product to China at about a quarter of the logistics costs).
But with a limited life of mine, it’s not long before GEMCO will be mined out. “So, the Kalahari’s time is coming,” Kerr said. But the rail and port infrastructure will need to be in place if investment is to be made in South Africa given that there are other manganese-rich nations such as Gabon, Ghana and Zambia.
26 June 2024
Transnet has delayed its annual 10-day rail maintenance on South Africa’s main coal export line by two weeks to allow for more time for producers to build up their stocks at the Richards Bay Coal Terminal (RBCT).
Transnet Freight Rail (TFR) said the North Corridor rail line will now be shut for maintenance from 23 July-1 August, instead of 9-18 July. Transnet did not give a reason for the change.
Industry sources believed the delay was due to low RBCT stock levels, which have been hovering around 2.0-2.2 mt. That is well below the usual 4-5 mt stock level ahead of maintenance period.
At current levels, RBCT would be forced to slow or even halt its vessel loadings during the maintenance period. As of now, RBCT’s loading schedule is for a total of 3.8 mt in exports in July, down from 4.5 mt estimated in June.
“They are trying to push as much as tonnage as they can through to RBCT to at least have a decent month,” an industry source told McCloskey.
A trader said the delay would unlikely be enough time to build stocks to a comfortable level. “I don’t see TFR making up for lost tonnage within weeks,” he said.
Transnet’s annualised run rate in the first half was 46 mt, which if sustained in the second half would be worse than the 30-year low of 48 mt last year. The rail line continues to struggle with derailments, cable thefts, power cuts and community unrest.
Despite the rail disruptions, RBCT exports are expected to reach 26.05 mt in the January-June period, up 11% from a year ago, according to an industry source. This disparity between railings and port shipments is the main reason why RBCT stocks remain so low.
Thungela, one of South Africa’s largest coal exporters and an RBCT shareholder, said this week it needed Transnet to increase its export coal railings by at least 20% to an annualised run rate of 57 mt in the second half.
If Transnet isn’t able to do this, Thungela CFO Deon Smith warned that it could face a significant build-up of inventories at its mines or be forced to lower its production guidance of 11.5-12.5 mt this year.
25 June 2024
McCloskey is pleased to present its Green Steel Outlook, comprising a breakdown of steel production from the world's 27 largest steel producer countries by technology to 2050.
The technologies covered are:
We expect that we will update this outlook twice each year in June and December, with additional updates on an ad-hoc basis if meaningful changes occur.
Global Green Steel supply outlook to 2050
Green Steel Drivers
Overall drivers
Drivers towards green steel production fall into three categories:
Technology will evolve
Our outlook is driven by two (hard to predict) technology expectations: current green technologies will evolve and become cheaper, and new technologies will evolve. In particular, we expect that new carbon capture technologies will evolve and proliferate, particularly solid-state storage of carbon. The cost of hydrogen production and hydrogen DRI steelmaking will fall.
Resource constraints
Our outlook includes significant expectations for resource constraints that will limit the ways that green steel can evolve:
Types of future steelmaking technologies
We see eight broad groupings of future technologies for steelmaking, though of course more could evolve:
Regional drivers
European Union
United Kingdom
Turkey
Ukraine
Russia
China
India
Iran
Brazil
Saudi Arabia
Egypt
Indonesia and Malaysia
East Asia (Japan; Korea; Taiwan, China)
Vietnam
United States
Canada
Mexico
11 June 2024
Manganese ore prices eased from this year’s highs amid growing resistance from buyers, while most ferroalloys prices in India also slipped due to a lack of domestic demand.
The price of 37% manganese ore eased to $6.20/dmtu CIF Tianjin, from $6.41/dmtu in the previous week, while 44% softened to $8.25/dmtu CIF Tianjin, from $8.30/dmtu, according to sources.
A growing number of manganese ore importers believe the three-month rally has gone too far with global ferroalloys demand still relatively weak. Both the 37% and 44% manganese ore prices have nearly doubled since South32 halted GEMCO exports due to damage from Tropical Cyclone Meghan in mid-March.
Offers for imported manganese ore into India softened during the week, with 37% manganese from Vizag port on the east coast heard at the equivalent of $6.35/dmtu. For 44% and above manganese, offers were heard at $8.40/dmtu, according to Indian ferroalloys producers.
Last week, India’s largest miner, MOIL, increased its prices of manganese ore by 30-35% month-on-month for deliveries in June.
Meanwhile, India’s import of various grades of manganese ore and concentrates in April slipped 28% on month to 397,017 t, from 553,823 t in March, according to government data.
Of the total imports in April, South African shipments fell to 214,987 t from 333,322 t in March, while Gabon slipped to 123,270 t from 211,013 t. There were no imports of Australian ore in March or April.
In the ferroalloys markets in India, prices fell over the past week, taking a cue from the softer manganese ore market.
Offers for nearly all grades of ferroalloys for domestic sales slipped by around INR5,000-8,000/t ($59.84-95.75/t).
Domestic offers for SiMn 60-14 were heard between INR84,000-86,000/t ($1,005-1,029/t), against the previous week’s offers in the range of INR93,000-93,600/t ($1,113-1,120/t).
Prices of FeMn 70% eased to around INR93,500-94,500/t ($1,119-1,131/t), from previous week’s INR97,000-97,500/t ($1,161-1,167/t).
In the export market, offers for SiMn 65/16 and FeMn 75% were unchanged at previous week’s levels of $1,200-1,225/t FOB and $1,220-1,260/t FOB.
Meanwhile, a leading ferroalloys producer, Maithan, restarted furnaces at its subsidiary Impex Ferro Alloys Ltd, at the beginning of June, according to market sources. The subsidiary has installed capacity of 49,500t/y of SiMn, or about 70,000 t/y of FeMn.
The price of ferro-chrome (FeCr) and ferro-silicon (FeSi) used in stainless steel production eased slightly during the week, after remaining nearly unchanged in the past three weeks.
Offers for FeCr were heard at around INR103,000-104,000/t ($1,233-1,245/t), down from the previous week’s INR104,000-105,000/t ($1,245-1,257/t), while that for FeSi eased to around INR97,000-98,000/t ($1,161-1,173/t), from INR98,000-99,000/t ($1,173-1,185/t).
11 June 2024
South Africa’s new Government of National Unity, consisting largely of the African National Congress (ANC) and the Democratic Alliance (DA), has yielded a fairly market-friendly outcome for the country, quelling fears that populist politics would rule the day.
In last month’s general election, the ANC lost majority support for the first time since the dawn of democracy in 1994, garnering only 41% of the vote.
Amid intense pressure from various quarters, the ANC declined to choose any particular coalition partner and instead invited all parties to engage with it on a Government of National Unity (GNU).
However, it failed to come to an agreement with more populist parties – the Economic Freedom Fighters (EFF) and uMkhonto weSizwe (MK).
Ultimately, the GNU has been signed with the DA, which is seen as a business-friendly party that garnered 22% of the vote. Together, the new government will occupy more than 60% of the seats in parliament. A handful of smaller parties are also expected to sign onto the agreement.
The outcome, which ensured the ANC’s Cyril Ramaphosa was re-elected for a second term as state president, has brought some comfort to the markets with the Rand settling back to levels last seen before the elections on 29 May. The benchmark 10-year bond yield of 10.3% has also settled back to levels last seen in mid-March.
With only two weeks permitted to form the new government, the GNU has agreed only to a set of principles with finer details to be thrashed out later.
In terms of the GNU agreement, government policies and decisions will be determined through “sufficient consensus” where at least 60% support must be obtained.
If this majority can be secured, the ANC’s legislative programme will not be disrupted. But any serious disagreement between the ANC and the DA and a failure to reach sufficient consensus could collapse the GNU - a scenario both parties would presumably look to avoid.
The ANC has touted the deal as good for stability. With the investor-friendly DA party as its partner, the ANC is expected to continue its plans to restructure the heavily indebted state utility Eskom, open Transnet up to third-party investment, and extend the life of its coal-fired power plants to ensure energy security
DA leader John Steenhuisen highlighted the need to address the advanced state of decline in logistics and infrastructure and to tackle endemic corruption.
But political commentators have noted the two parties are likely to butt heads on a number of issues such as the controversial National Health Insurance bill and the government’s support for Palestinians.
During its campaign, the DA promised to rip up the current mining charter, which requires black ownership at permit-holding mining companies to be at least 30%. There may be room for collaboration now under the new government. According to mining industry sources, the previous dispensation had recently begun consulting the sector on the development of a new charter.
Emerging-market analyst at Credit Agricole, Yeon Jin Kim, sees the coalition with the DA as market-friendly and rand-positive. “In the medium term, we believe there could be more upside for the rand, provided key reforms are announced and implemented,” she wrote in a note.
Ahead of the developments, Frank Gill, Europe, Middle East and Africa sovereign specialist at S&P, noted there appeared to be a lack of consensus between the ANC and DA, so governing under the new GNU could prove unstable.
Ramaphosa will be inaugurated on Wednesday, after which he will announce his cabinet, which is anticipated to include members from DA and other parties in the GNU. The DA is said to be in line for six ministerial posts and four deputy minister posts. The party reportedly has its eye on the Agriculture and Trade, Industry and Competition ministerial posts.
The MK party – which is led by corruption-accused former president Jacob Zuma – has meanwhile joined forces with the so-called “progressive caucus”, which is comprised of the EFF and a handful of other smaller parties. Together these parties have a combined 100 out of 400 seats, or 25% representation, in the National Assembly.
Zuma has said the progressive caucus will soon deliver “a detailed battle plan” to win back the country from the DA and ANC “sell-outs”.
The MK will also continue with a court bid to have the election overturned due to alleged rigging, although the evidence in this regard is reportedly thin.
11 June 2024
A McCloskey delegation attended this year’s International Manganese Institute (IMnI) annual conference in Muscat, Oman. Here are the key takeaways from the event:
GEMCO
Manganese ore market
Alloys market
Steel
11 June 2024
Coal exports from South Africa’s Richards Bay Coal Terminal (RBCT) are expected to rise 11% in the first half of this year compared to a year ago, as Transnet railings continued to improve.
RBCT shipments are forecast to reach 26.05 mt in the January-June period, up from 23.56 mt a year ago, according to an industry source. RBCT does not release monthly export data.
On an annualised basis, RBCT exports are on track to rise to 52 mt this year, up 11% from last year’s 30-year low of 47 mt. However, that remains well below its 70 mt/y average between 2013-2020 when Transnet was operating at normal capacity.
On a monthly basis, July exports are expected to fall to 3.8 mt from an estimated 4.5 mt this month due to a 10-day long planned rail maintenance period.
During the maintenance period, exporters use their RBCT stockpiles to ensure no slow down in exports. Currently, stocks are at 2.21 mt, well below the typical 4-5 mt level seen right before maintenance starts. Miners will need to significantly ramp up their stocks to avoid export delays in July.
Over the weekend, Transnet reported a brief rail disruption that interrupted coal shipments for a few hours.
"Train 9424 failed causing double line blockage, we also experienced broken rail at Uloiwe, service was suspended which in turn impacted the supply of empties to the mines and other loadings sites for General Freight Business (GFB)," the rail operator said in an 8 June customer notice. "Service resumed later in the afternoon."
Despite the brief disruption, Transnet railings to RBCT are ramping back up compared to last month, when exports dropped 13% on the month to 3.92 mt due to train derailments, power outages and community unrest.
India was the top destination in the January-May period with 9.49 mt, representing 44% of RBCT’s total exports.
South Korea followed with 2.93 mt, and Vietnam with 2.02 mt. RBCT exports to Pakistan totalled 1.19 mt.
10 June 2024
The Indian steel growth story is expected to stay intact both in the short and long term despite the incumbent Narendra Modi-led Bharatiya Janata Party (BJP) being unable to win majority seats in the Lok Sabha or the lower house of the parliament.
In the recently concluded elections which spanned seven weeks, the BJP won 240 seats, 32 seats short of the 272-mark needed to form a government on its own. While Modi will be sworn in as Prime Minister in the next few days, he will now lead a coalition government and will need approval from partners to pass key bills.
“The third term of the Modi-led government is good news for the economy, but the government will have to work with allies on key policies,” an India based political analyst said.
Participation in a coalition government is something untested for Modi and his supporters. Modi's leadership to date has been characterised by decisive action, which may or may not be possible with partners.
The steel sector in India in the past 10 years under Modi’s leadership has seen growth and expansion in both green and brownfield projects. Crude steel output rose to 140.20 mt in 2023 from 111.40 mt in 2019.
Steel production in the first four months of this year was 49.5 mt, up 8.5% year on year, according to the World Steel Association, with the pace of production annualising to 149.8 mt.
This week, Indian ratings agency, ICRA, upgraded its growth outlook target for domestic demand to 10% from a previous estimate of 7%.
The agency said the revision in demand growth was due to healthy government capex spending so far this year and demand from steel consuming sectors such as housing, automobile and white goods.
The country’s GDP grew faster than expected at nearly 8% in the first quarter, according to government data. Economists expected FY24-25 growth at over 7%.
Indian market participants said domestic steel demand is unlikely to see any change since there are no new major policies anticipated for the steel sector.
“Modi is leading the government, the infrastructure projects which have been signed off will not be taken off the table. The coalition government is unlikely to create any blockades,” an Indian trader said.
Indian steel producers have plans to add 27 mt of steel production capacity in the next two years. Steel majors such as JSW expect to add nearly 9.00 mt, Jindal Steel and Power Limited (JSPL) 6.30 mt, Tata Steel 5.75 mt and Steel Authority of India Limited (SAIL) 2.00 mt by 2026. The Ministry of Steel has set a target to produce 300 mt of steel by 2030-31 to meet the economic growth targets.
It remains an open question as to whether or not these targets can be reached; McCloskey in its latest Steel Market Briefing projects India’s steel production in 2030 at 190 mt/y.
“BJP has won a majority in all key steel producing states – Gujarat, Orissa. There are unlikely to be any hurdles to any projects. The non-BJP led states may delay projects, but it's unlikely,” a Mumbai based steel source said.
Also, steel business in India is largely in the hands of private companies such as Tata, JSW, ArcelorMittal and others.
“There are efforts to privatise state mills which may suffer some setbacks but it won’t hamper growth of the sector,” a Delhi based steel supplier said.
Meanwhile, the spot market for both hot and cold rolled coil is muted in the country due to monsoons. Market sources said that from July onwards domestic demand will start rising and mills production will be strong in anticipation of a strong third and fourth quarter in the Indian financial year.
Mills have been undergoing annual maintenance from April-June.
“There is a bit of a watch and wait situation as demand is typically weak in these months,” a local buyer said.
Meanwhile, in response to the election result, the Indian stock market’s key indices – BSE and NSE Nifty 50 - posted their worst day in four years, both dropping by 6% on Tuesday. However, markets rebounded on Wednesday and both indices went up by 1.5%.
“The markets showed a strong reaction but as an investor, the long-term story is intact. Large international portfolio managers are best advised to keep increasing their Indian portfolios,” a Mumbai based broker said.
Indian mills imported over 57 mt of coking coal last year lead by Australia at 29.36 mt, United States 7.66 mt and Russia 6.13 mt, according to McCloskey data.
“From a supplier’s perspective, India is a strong market. There are no known trade wars with any country hence election results are not going to impact business,” a buyer of US material said.
However, investors in met-focused US coal producers took notice on Tuesday of the election outcome and this sent shares of Arch, Alpha, Ramaco and Warrior down 8% or more as the largest single export destination for US steelmaking coal learned its fate. Share prices for these names were up on Wednesday, offsetting some of the prior declines.
Indian coking coal imports are expected to rise to 106.20 mt by 2030, according to McCloskey data.
In the spot market, buyers said July-August will see a resumption in spot met coal buying.
In related news, on Wednesday, local reports suggested that the Indian steel ministry is against the quantitative restrictions (QR) proposed on ‘low ash met coke’ after complaints by domestic met coke producers – BLA Coke, Jindal Coke, Saurashtra Fuels, Vedanta and Visa Coke.
If the QR were to be implemented, the import volume of all met coke will be capped at between 2.65-2.85 mt, which is nearly 1 mt less than total Indian demand, according to industry experts and the notification.
Met coke imports into India have risen with seaborne imports at around 4.00 mt last year, up from 3.23 mt in 2022, according to McCloskey data. The key exporters were Poland, China, Indonesia, Colombia, and Japan.
Published by Ranjana von Wendland
04 June 2024
The African National Congress (ANC) has lost its majority for the first time in 30 years, forcing the ruling party into coalition talks and an uncertain future.
The official results of the 2024 general election were released by the Electoral Commission of South Africa (IEC) on Sunday evening, confirming a significant loss in support for the ANC which achieved under 51% of the vote for the first time since the dawn of democracy in 1994.
Coalition talks to establish a government commenced immediately.
The ANC garnered just 41% of the vote, while the official opposition, the Democratic Alliance (DA), received almost 22%.
The uMkhonto WeSizwe (MK) party, of which former president Jacob Zuma is the de facto leader, won 15% of the vote while the Economic Freedom Fighters (EFF) obtained 10%.
Parties have 14 days to enter into a coalition deal and form a government.
“What this election has made plain is that the people of South Africa expect their leaders to work together to meet their needs," President Cyril Ramaphosa said at the release of the results on Sunday.
Prior to the election, the DA had claimed it would not enter into a coalition with the ANC. Post-election it has however established a negotiating team to lead talks with other political parties.
A so-called “doomsday” coalition between the ANC, EFF and MK Party now has the numbers to take control, but the DA has vowed to do everything within its power to prevent this from happening.
Big business in South Africa has warned it will withdraw from partnerships with the government if a new ruling coalition includes partners who push for nationalisation and new taxes.
Amid speculation about an ANC-EFF coalition ahead of the election, CEO of Business Leadership South Africa, Busisiwe Mavuso, told News24 business would not support an administration “touting policies of mass economic destruction” – referring to the EFF's manifesto which includes policies to nationalise mines, banks and construction firms, as well as the Reserve Bank, along with proposed new taxes on the wealthy and companies.
There is speculation as to whether Ramaphosa would have to resign following the party’s poor election results. The MK party has already insisted they will not work with a Ramaphosa-led ANC. He is however said to enjoy support from the party’s National Executive Committee and will likely be implored to stay on.
If Ramaphosa should exit, deputy president Paul Mashatile would take the reins and could be more amenable to a populist partnership with the EFF or MK.
The election was declared to be free and fair by the IEC but the results are not without contestation as the commission received some 580 complaints relating to alleged procedural issues.
The MK party and Zuma – who was at the centre of state capture allegations – have claimed they should have won two thirds of the vote and called for the election to be done afresh. Zuma warned the IEC not to declare results on Sunday night noting that doing so would be tantamount to provoking the party and potentially giving rise to violence.
Dubbed the “July unrest”, public violence and looting that ripped through parts of Gauteng and Kwazulu-Natal in mid-2021 was triggered by the Constitutional Court issuing an arrest order for Zuma.
On Sunday the state’s security cluster warned that any attempt to undermine the state's authority would not be tolerated.
The election results took many by surprise, as the ANC lost a great deal of support to the MK party in a number of its previous strongholds.
In the coal-rich Mpumalanga province, the ANC only just hung onto its majority with 51.5% of the vote, while the MK party obtained 17% and the EFF obtained 14%.
In KwaZulu-Natal, which is home to 14 coal mines – bituminous and anthracite - as well as the Richards Bay Coal Terminal, the ANC garnered just 17% of the vote while the MK party obtained 45%. The Inkatha Freedom Party with whom the ANC has historically been allied with, obtained 18% of the provincial vote.
An industry source said KZN is likely to emerge as a “very difficult place to do business”.
One KZN coal mining source however expects such economically beneficial activities would continue noting that the province is already a very challenging environment for business.
04 June 2024
Rail and port constraints in South Africa and Gabon are severely limiting manganese exporters from taking full advantage of rising global prices.
Manganese ore prices have surged 80% over the past two months following the halt in exports of high-grade supplies from South32’s GEMCO mine in Australia.
African exporters are desperate to step in and fill the void but are limited by logistics.
"The port is heavily congested with all the shippers trying to get their manganese out while the price is high. So, the volumes are going through the roof at the moment," a shipping agent at South Africa’s Port of Elizabeth told McCloskey.
He added that some vessels were waiting nearly a week to load their cargoes.
South Africa isn’t the only one dealing with logistical problems.
The International Manganese Institute (IMnI) said April production from Africa and the Middle East dropped 6% on the month, mainly due to “transport infrastructure constraints” in Gabon.
Global manganese ore supplies in April tumbled 10% on the month to around 1.5 million metric tonnes (mt) of manganese contained because of the loss of GEMCO production and lower Gabon shipments.
For the January-April period, global production is down 6% on the year to 6.4 million mt of manganese contained, according to IMnI.
As a result, manganese ore stocks at Chinese ports were down 5% to 4.7 million wet mt, IMnI said. That corresponds to 2.1 months of apparent consumption by Chinese consumers, lower than an average of 2.3 months in 2023.
In Tianjin and Qinzhou ports, there was a 5% month-on-month increase in inventory of South African ore, while inventory levels for Australian and Gabonese ore dropped 24% and 12%, respectively.
“HGO (high grade ore) sources remains really scarce as Brazil hasn’t started to export HGO while Ivory Coast is shipping ore below 35%. I expect a massive visible HGO shortage for early Q4,” a major Africa exporter said.
"From our side, we have enquiries from smelters that we have never worked with, that are willing to buy our ore not only to secure volumes but to have enough ore to operate in the near term.”
GEMCO last month said plans were underway to have GEMCO begin stockpiling from June.
"GEMCO will commence a phased return to mining activities from June, initially seeking to build stockpiles ahead of the 2024/2025 wet season," the company said in a statement.
However, South32 maintained its target date to resume exports by the January-March 2025 period.
28 May 2024
Miners outside China hoping to break into the battery-grade manganese market face an uphill battle due to limited expertise, low market prices and high capital costs, an industry executive said.
Giyani Metals, GoodEarth, Element 25, Euro Manganese and Jupiter Mines are among the growing list of non-China companies aiming to enter the manganese sulphate market, as the United States and Europe look to secure its own battery supply chain.
"We don’t have a competitive advantage over China,” said Louie Nel, CEO of Manganese Metal Co, at the Junior Indaba last week. “Our cost of capital is expensive. On a cost basis, we certainly can't compete, but we can on a quality basis.”
Based in Nelspruit, Mpumalanga, MMC is the world’s only non-China based producer of high-grade electrolytic manganese metal (EMM) with a refinery of 99.9% (selenium-free) EMM.
The company currently supplies the steel and aluminum industries and has long sought funding of ZAR540m ($29m) to turn manganese ore into sulphate for the battery industry.
At last year's Junior Indaba conference, manganese producers were enthusiastic about gaining entry into a Chinese dominant battery market by supplying at an over 70% more cost.
But now, the sentiment is that it will be an uphill battle. Nel told the conference that mounting US restrictions and geopolitical tensions give them a chance to market entry, however, technical expertise remains a challenge to de-linking from China.
"There is a technology challenge. Globally, there are about 12 plants currently making manganese sulphate, 11 of those being in China,” Nel said. “There really is no technical ability. So to go to a technical resource to help you set up a plant is hugely challenging unless you go to China.”
For a manganese-rich country, Nel said that South African producers only stand a chance of being successful if they act swiftly.
"By the time we sort out all legislation, and all our incentives to get production going in Africa, we would’ve woken up to find those incentives gone and someone else would’ve taken that spot to fill the non-Chinese gap. So, speed to market is important."
Despite the difficulties, some remain optimistic that Western governments will step in to ensure their investments are worthwhile.
High purity manganese sulphate monohydrate (HPMSM) producer Giyani Metals said their downstream process positions them to get a US-backed subsidy.
"To qualify for the IRA incentives, more than 50% of the value add must be done in North America,” said CEO Danny Keating. “We are making this massive downstream beneficiation system. Our product still needs to be put into the pre-CAM material, create the battery cell, and then put into the car, so there is definitely more than 50% downstream."
TSX-listed Giyani completed its first drawdown of $5.7m (ZAR110m) from its $16m Industrial Development Corporation of South Africa (IDC) Facility.
28 May 2024
South Africa’s Department of Mineral Resources and Energy has signed a service-level agreement with the preferred bidder for a long-awaited cadastral system.
The system, a new, transparent, mining rights database, is considered critical to unlocking exploration investment in South Africa’s resources sector, while also assisting to clear a severe mining rights applications backlog.
The Department’s Deputy Director-General (DDG) of mineral and petroleum regulation in the Department of Mineral Resources, Tseliso Maqubela, confirmed the service-level agreement with the Canadian-South African PMG Consortium was signed last week.
The PMG Consortium will design, implement and maintain a new mining licensing system. It is made up of the Canadian group Pacific GeoTech Systems and two South African companies: the ICT consulting group MITS Institute and black female-owned professional services firm Gemini GIS and Environmental Services.
Industry participants have lauded the development as “incredibly exciting”, as frustration had been mounting over continued delays in finalising the contract.
A transparent mining cadastral system allows investors to see who holds what mining rights over any property.
The absence of a cadastral system has contributed to a huge backlog in processing mining rights applications, said Maqubela, who noted the department had processed over 2,800 applications in the previous financial year. That is not to say these applications were all approved as often mining rights are applied for on privately owned land. The bulk of the current backlog relates to coal mining applications in Mpumalanga, he said.
21 May 2024
South32 is open to selling its manganese business for the right price, as the world’s top manganese producer looks to focus more on base metals like copper, aluminum and zinc.
“Overall, we quite like manganese. It’s not a huge part of our business but probably like every other part of the business - it is to sell at the right price,” said South32 CEO Graham Kerr at the Bank of America Securities Global Metals, Mining & Steel conference last week.
Kerr pointed out that it was not planning to sell its Illawarra Metallurgical Coal (IMC) business in New South Wales, but a buyer came forward with an offer that was “attractive in terms of valuation, derisked the business, reduced our capital intensity.”
In February, Golden Energy and Resources (GEAR) and M Resources agreed to acquire IMC in a cash deal valued at $1.65bn. The deal is expected to be completed in July-December this year.
South32’s manganese business includes its South African and Australian mines through its Samancor joint venture with Anglo American. South32 owns 60% of Samancor and Anglo the remaining 40%.
Samancor’s assets include Australia’s GEMCO mine, which is the world’s second largest manganese ore mine, and South Africa’s Mamatwan and Hotazel mines. GEMCO, which supplies half of the world’s high-grade manganese ore, has halted exports for the rest of the year due to damage sustained by Tropical Cyclone Megan in mid-March.
South32 also owns the Hermosa Clark project in the United States, which has the potential to produce battery-grade manganese ore for the North American electronic vehicle market.
Last year, South32's manganese production totalled 3.55 mt in Australia and 2.11 mt in South Africa, providing underlying earnings before interest, taxation, depreciation and amortization (EBITDA) of $435m.
Last week, Anglo said it had not yet decided the future of its stake in Samancor, as the miner also looks to simplify its own portfolio to just copper, iron ore and crop nutrients.
Anglo’s CEO Duncan Wanblad said its manganese joint venture with South32 has a “great set of assets”, but the company has yet to decide whether to keep it or divest it.
Anglo's share of production in Samancor totalled 3.7 mt last year, with the assets providing EBIDTA of $231m.
Although major miners like South32 and Anglo are looking to simplify their businesses, there are plenty of other miners keen on manganese, especially for its growth potential in the electronic vehicle battery sector.
Australia’s Jupiter Mines, which has a 49.9% stake in South Africa’s 3.3 mt/y Tshipi é Ntle mine, wants to be the world’s largest manganese ore producer by 2028. It’s currently the 15th largest producer and would need to double its output to surpass South32 to become the new market leader.
Menar has also expressed interest in expanding its manganese portfolio after its subsidiary, Sitatunga Resources, entered the market in September 2021 with the 0.36 mt/y East Manganese mine.
And newcomers like Exxaro Resources are looking to diversify into manganese but have yet to find a mine to invest in.
21 May 2024
Anglo American’s new restructuring plan – which will pare the group’s exposure down to copper, iron ore and crop nutrients – appears to have found more favour with South African stakeholders than a takeover plan proposed by BHP.
Anglo American last week released the “bold” restructuring plan, which will see it divesting from its metallurgical coal, nickel, diamond and platinum mining businesses.
The plan comes as BHP has made two takeover proposals for Anglo, the latest of which values the company at £34bn ($42.7bn). Anglo has rejected both.
Under BHP’s proposal, Anglo would first need to demerge its Anglo American Platinum and Kumba Iron Ore businesses. This has drawn the ire of South African stakeholders, including the mineral resources minister and the country’s largest trade union federation.
In terms of Anglo’s restructuring plan, the group will hang on to Kumba, a source of premium iron ore supply, but the South African platinum business will still be demerged. Additionally, the diamond mining business, De Beers, will also be sold – the flagship mine which is in South Africa’s Limpopo province.
While investors are still weighing up the two options, there appears to be a bias towards the Anglo plan, which looks simpler, and likely quicker as it carries less execution risk.
One analyst at an asset manager invested in Anglo American told McCloskey there are massive execution risks all round, but Anglo has a better chance of getting its plan right.
"Anglo knows community issues, it's well aware of tax issues, it understands its own ability to execute. And I think with [activist fund] Elliott as a significant shareholder, they're going to remain quite focused,” the analyst said.
“But, of course, now that they've put some milestones down, they will have to meet them."
The BHP plan is not wildly different, but the bid price is viewed by shareholders as too low. BHP will need to increase its price to gain an edge. BHP has offered Anglo shareholders £27.53 per share, but a range of market analysts think the right price is north of £30 per share.
Some investors, including the likes of Coronation Fund Managers, are however worried about the tax and other cost implications of Anglo’s plan. While BHP has offered to cover any costs related to Anglo’s platinum demerger, this yet-to-be determined cost must be borne by Anglo if it goes it alone.
Mineral Resources and Energy Minister Gwede Mantashe has already voiced his concern with BHP acquiring Anglo American, noting the country had negative experiences with BHP which previously operated in South Africa.
But Mantashe struck a conciliatory tone over the Anglo plan. “It is their strategy and they must do anything that will optimise value,” the minister was quoted as saying by Bloomberg.
Legal experts have however pointed out that Mantashe does not have a say when it comes to mergers of this nature.
In terms of the Mineral and Petroleum Resources Development Act (MPRDA), the disposal of a “controlling interest” in listed entities requires no greenlight from the mines minister.
Additionally, if any such merger or takeover does take place and certain assets and rights must be disposed of, the mines minister cannot refuse a section 11 consent.
For BHP’s proposed deal to get over the line, it will require approvals from anti-trust authorities around the globe. The change of control will certainly require approvals from the competition authorities in South Africa, which fall under Minister of Trade, Industry and Competition Ebrahim Patel, who is well-known for imposing conditions on major deals where public interest issues arise.
Anglo American’s divestment from its platinum business won’t require competition approvals if it goes as planned, by way of a demerger, where the shareholding is unbundled into the already listed entity, leaving Anglo shareholders holding the stock.
Anglo has also said it was better placed to ensure the assets are responsibly divested, as it would remain accountable to the country where it would continue to run Kumba iron ore.
The Congress of South African Trade Unions (Cosatu) also opposed the BHP proposal. The federation said it wanted prime mining assets to be held by South African companies and was pleased about Anglo’s professed commitment to the country, where it employs 36,000 workers.
“Whether a sale or restructuring takes place, Anglo needs to ensure that it is not accompanied by retrenchments. Any restructuring should be engaged with organised labour at Anglo, led by NUM and include opportunities for workers to become shareholders at Anglo,” said Cosatu spokesperson Matthew Parks.
The Public Investment Corporation (PIC), which manages South African government employee pension funds and holds a 7% stake in Anglo, said it will assess any offers that are presented to shareholders and will engage directly with the investee companies.
“The PIC is a long-term investor and any transaction presented will be assessed to ensure value creation for our clients,” it said in a written response to questions.
“In addition, the mining sector remains a critical part of the South African economy, impacting a wide variety of stakeholders, therefore, new opportunities that may arise in the sector need to take these factors and long-term sustainability into account.”
14 May 2024
As South Africans prepare for what could be the biggest sea change since the end of apartheid, one thing is clear: coal will remain king.
Despite their vastly different views on nearly everything, the political parties battling in the 29 May general election all appear to agree that South Africa still desperately needs thermal coal to keep the lights on.
“We have to keep coal in the energy mix at this stage,” Samantha Graham, shadow electricity minister for the main opposition party Democratic Alliance (DA). “We don’t have enough base load energy coming from renewables and we don’t have enough storage capacity to make renewables a base load energy.”
Last year’s unprecedented power crisis exposed the hard realities of trying to phase-out thermal coal too quickly.
As a result, the ruling African National Congress (ANC) plans to extend the life of several Eskom’s coal plants that were due to be decommissioned before 2030. The government said it will announce the plants’ new timeline in June.
This is good news for South Africa’s coal industry, as Eskom burns around 100 mt/y of coal or nearly half of the country’s total production.
ANC’s main political rival, DA, also seems to support such a move but stops short of publicly backing the ruling party’s decision.
“You can’t retire (Eskom’s plants) until you have an alternative source of energy,” Graham said. “So, you can’t look at the coal-fired power stations in isolation, you have to look at the entire system and ensure that you have got stability of supply.”
South Africa’s other political parties, the Economic Freedom Fighters (EFF) and uMkhonto we Sizwe (MK), also appear in agreement on coal’s rule for the country’s energy security. But that is where the common ground stops.
MK, led by former President Jacob Zuma, wants to nationalize all land, mining companies and natural resources, as well as the Richards Bay Coal Terminal (RBCT). It will also look to repeal all privatisation plans with Eskom, Transnet and other state-owned companies.
EFF has also pledged to nationalize all South Africa’s mines by 2028.
On the opposite side is DA, which is seen as the most investor friendly party. To attract foreign investment, it wants to rip up the current mining charter, which requires black ownership at permit-holding mining companies to be at least 30%.
Coalition government
With polls showing ANC likely to lose its majority grip for the first time since taking power in 1994, South Africa could be ruled by a coalition government. If this turns out to be true, the big question will be who the ANC partners up with?
For the mining industry, insiders tell McCloskey that they welcome change to the status quo. But it needs to be positive for business, or at the very least provides stability.
“As things stand right now, it’s not working. South Africa is not attracting enough investment, certainly not enough to move the dial,” an industry source said.
South Africa has become less and less attractive for foreign investment due to a worsening power crisis, systemic logistical issues, regulatory uncertainty and corruption. The Fraser Institute ranked the country 57th out of 62 global mining jurisdictions on its overall investment attractiveness. In comparison, Botswana was 10th.
Exploration is key barometer, and it’s doing dismally. South Africa’s real mining output is on a downward spiral, falling 13% on the year in 2022, according to the Minerals Council of South Africa.
“The pipeline of resources to establish new mines, and even to keep existing mines going, is diminishing – and it’s a massive problem,” he said.
An executive for a prominent South African coal mining company said the best outcome is a government that is capable and decisive. “It's about delivery of services in terms of Transnet, Eskom, and municipalities … The best outcome could be a coalition with the ANC and the Democratic Alliance (DA). That might actually bring some change.”
The final numbers will depend on voter turnout, with the ANC set to benefit from lower numbers. Voter turnout was 66% in the last election and is expected to be lower this year – possibly as low as 56%.
If only 56% turn out to vote, polls are showing the ANC with around 45% of the vote, the DA at 24%, 9% for uMkhonto we Sizwe (MK), and 8% for the EFF.
An ANC-Economic Freedom Fighters (EFF) coalition is most undesirable and has been described by the DA as “the doomsday scenario”.
However, this scenario is believed to be highly unlikely. The ANC’s National Executive Committee (NEC) would have to decide on coalition partners, but it reportedly has a centrist orientation and is wary of upsetting investors.
“It's every party for themselves (right now),” said Andre Duvenhage, a prominent political analyst.
“But after the election, when we have a clear indication of the support base, the fundamentals of the political game change.”
African National Congress (ANC) – led by President Cyril Ramaphosa
Democratic Alliance (DA) – led by John Steenhuisen
Economic Freedom Fighters (EFF) – led by Julius Malema
uMkhonto Wesizwe (MK) – led by former President Jacob Zuma
14 May 2024
The strong rally in global manganese ore markets gained strength with South African FOB prices soaring more than 30% in a week due to the tightening availability of high-grade material.
South Africa’s 37% manganese price climbed to $5.38/dmtu FOB on the week, up 33% from $4.04/dmtu FOB in the previous week and the highest so far this year.
The market has rallied 72% since South32’s GEMCO mine halted exports of high-grade ore, following the devastation of Tropical Cyclone Megan in mid-March. GEMCO, the world’s second largest manganese mine and supplier of half of high-grade supplies, is not expected to resume shipments until January-March 2025.
On a delivered basis, the price of 37% manganese rose 26% on the week to $6.25/dmtu CIF Tianjin on 10 May, from $4.97/dmtu CIF on 3 May, according to market sources.
The delivered price for 44% manganese was $6.93/dmtu CIF Tianjin, up 14% from the previous week’s $6.06/dmtu CIF Tianjin.
Chinese and Indian crude steel producers are now facing a significant shortfall in high-grade manganese ore supplies for the remainder of the year. (see story below)
In India, offers for 44% manganese ore continued to climb by the day, rising to $7.50/dmtu CFR by the end of last week, from $6.20/dmtu a week before, traders said.
In China, 44% offers rose to $7.30/dmtu CIF Tianjin by Friday, up from $6.90/dmtu CIF Tianjin the day before.
The rally in manganese markets provided some support to India’s ferroalloy prices at the start of last week, but that faded amid sluggish steel demand.
The basic price of long products (TMT) in Kolkata eased to INR46,200/t ($552.98/t) on 11 May, from INR46,600/t ($557.77/t), after having risen sharply in April.
As a result, the offered price of silico-manganese (SiMn) 60-14 in Raipur, Durgapur and Vizag areas, eased to around INR94,500/t ($1,131.10/t) on 11 May, after having risen to INR96,000-97,000/t ($1,149.06-1,161.03/t) earlier in the week.
The price on 11 May was unchanged from previous week’s levels.
A few deals in the domestic market during the week were heard at around INR94,000-94,500/t ($1,125.12-1,137.09/t) levels.
Export offers for SiMn 65-16 remained firm at around $1,200-1,260/t FOB for loading in end-May and June, with one deal heard at around $1,225/t FOB.
Export offers for SiMn 60-14 grade ranged between $1,125-1,150/t FOB.
Similarly, domestic offers for ferro-manganese (FeMn) 70%, initially rose to INR97,000-97,500/t ($1,161.03-1,167.01/t) on 8 May, but then eased to INR96,300-96,600/t ($1,152.65-1,156.24/t) by 11 May.
Export offers for FeMn 75% were heard in a wide range of $1,220-1,280/t FOB. This too was nearly stable from previous week’s offers at around $1,250/t FOB.
Ferro-chorme (FeCr) and ferro-silicon (FeSi), used in stainless steel production, remained range bound with slight downward bias seen in the case of the former.
Offers for FeCr eased by INR1,000/t ($11.97/t) from previous week’s INR106,000-107,000/t ($1,268.75-1,280.72/t), while that for FeSi firmed up to around INR101,000-101,500/t ($1,208.90-1,215.89/t), from previous week’s around INR99,000-99,500/t ($1,184.96-1,190.95/t).
7 May 2024
South African thermal coal prices recovered after three straight weeks of losses, supported by low stocks at the Richards Bay Coal Terminal (RBCT).
For the week, the Richards Bay 6,000 kc NAR price averaged $106.35/t FOB last week, up from $104.24/t FOB in the previous week.
A 50,000 t Richards Bay cargo for June loading changed hands last Thursday at $105.50/t FOB. The June contract last traded on 1 May at $104.00/FOB for 50,000 t.
For July, the best bid last week was $107.00/t FOB and the best offer was $115.00/t FOB.
On Monday, June's bid-offer range was $99.00-107.00/t FOB and July's bid-offer range was $105.00-113.00/t FOB.
Stocks at the Richards Bay Coal Terminal recovered last week to 2.1 mt, up from the previous week’s uncomfortable 1.8-1.9 mt level. Traders expect stocks to continue to increase due to improved rail capacity.
In India, a cement maker is understood to have purchased a partial cargo of South African coal from a full Panamax vessel, which will be loaded in end-May or early June and arriving at Ennore/Krishnapatnam port on the east coast.
The price was heard at around $106.00-107.00/t CFR, basis 5,500 kc NAR. With freight assessed for a Panamax at around $18.50/t, that translates to an FOB price of $87.50-88.50/t FOB, basis 5,500 kc NAR. Last week, McCloskey assessed South Africa 5,500 kc NAR at $90.39/t FOB, same basis.
In addition, at least two sponge iron producers took small parcels of South African coal from stocks at Haldia and Gangavaram ports at around INR10,250/t ($122.76/t), excluding taxes, but including loading charges on rail/trucks.
Offers for South African coal were heard at around $92.00-93.00/t FOB, basis 5,500 kc NAR, towards the end of week, for Panamax loading in June, against bids in the range of $88.00-90.00/t FOB.
Offers were also heard at $106.00-107.00/t FOB, basis 6,000 kc NAR, for June loading Cape/Panamaxes from RBCT, against bids at around $102.00-103.00/t FOB.
A few offers were also heard at $72.00-73.00/t FOB, basis 4,800 kc NAR, for loading from RBCT, against bids at around $70.00/t FOB.
One offer was heard at $88.00-89.00/t CFR, basis 4,800 kc NAR (4,500 kc min) for a Supramax loading in May from non-RBCT ports.
In the off-spec market, differentials were wider to API4 prompt paper compared to last week.
McCloskey assessed the differential for 5,700 kc NAR market at minus $5.37/t to API4 paper last week, from minus $4.92/t in the previous week.
The differential for South African 5,500 kc NAR was assessed at minus $8.20/t, compared with minus $8.11/t in the previous week.
The differential for 4,800 kc NAR was seen at a discount of $18.28/t, compared with a discount of $17.93/t in the previous week.
7 May 2024
Global manganese ore prices continued to rally to fresh 2024 highs, as supply disruptions force China to use more of its stockpiles.
South Africa’s 37% manganese price rose to to $4.04/dmtu FOB on 3 May, from $3.92/dmtu FOB in the previous week, according to market sources.
On a delivered basis, the price of 37% manganese rose to $4.97/dmtu CIF Tianjin, from $4.80/dmtu on 26 April, while 44% manganese increased to $6.06/dmtu, CIF Tianjin, from $5.94/dmtu.
China has started to use up its manganese stockpiles amid a tightening of global supplies, following a halt in exports from South32’s GEMCO mine since March.
Before Tropical Cyclon Megan damaged GEMCO’s assets, the mine was a leading supplier of high grade (42-44%) manganese ore, accounting for nearly 20%, or 3.0-3.5 mt/y, of that quality’s global supplies. South32 expects exports to resume in January-March 2025.
“It does not seem likely that the supply from Australia and Ukraine can be restored in the near-term, which creates a significant structural deficit in the manganese market," said Tony Gu, partner at Datt Capital, on LinkedIn.
"The accelerated depletion of high-grade Australian manganese ore is likely to exacerbate (China's) port inventory level in absolute terms. Based on our analysis, if there's a 50% drawdown in high-grade inventory at the port (accounting for roughly 25% of the total inventory by ore tonnage), it could lead to a one-month decrease in port inventory, bringing it close to breaching the safety inventory level.”
As a result, Chinese and Indian buyers are looking to book cargoes further in the future to ensure supplies.
Eramet, which typically ships five vessels of 50,000 t of manganese ore to India per quarter, is moving a Cape carrying around 200,000 t to Vizag port on the east coast, a market source said.
“It plans to do mid-sea unloading and load some material in barges for onward delivery at Haldia port. This will ensure that there is no shortage of ore for Indian ferro alloys manufacturers,” a producer said.
Taking a cue from the firmness in global markets, domestic prices of manganese ore also increased, as users rushed to secure their supplies.
A 40,320 t auction by Sandur Manganese & Iron Ores (SMIORE) showed more interest with the volume and prices sold rising from its previous auction for various grades of manganese ore (20-35%)
SMIORE booked nearly 55% of the offered quantity, or 22,170 t, at a premium ranging between 2-17%, market sources said.
Bookings for ore with manganese content of 32-34% was done at a premium of 17% above the reserve price, while that of 34-35% content was heard at 11% above the reserve price. Bookings of ore with 20-22% Mn content was done at a premium of around 2%.
Separately, MOIL increased May delivery prices of all grades of ore by around 25-40% compared with April.
MOIL’s price for 44%+ manganese ore (suitable for producing ferro-manganese (FeMn)) increased 40% over April, while that for ore below 44% rose 25%.
Mid-grades of 25-30% Mn content (suitable for producing silico-manganese (SiMn)) increased 25% from April and that for manganese dioxide rose 1%.
Separately, MOIL reported April production of 160,000 t, which was up 22% on the year, and down 7% from a high of 172,000 t in March. Its April sales totalled 115,000 t, down from 145,000 t in March.
In addition, it will e-auction on 9 May a total of 1,080 mt of FeMn, 2,490 mt of manganese slag, 300 mt of manganese oxide and 1,230 mt of manganese dioxide.
India’s ferroalloys markets rallied over the past week, supported by the sharp rise in manganese ore prices and strong domestic demand.
The surge in prices encouraged some producers to halt loading of previously committed or finalised deals of SiMn or FeMn.
“Whatever material I have sold, I am not delivering and have informed the buyers that I will not be able to deliver because my furnace is down and we will talk in June-July,” one producer said.
On the other hand, the latest volatility prompted several exporters to stop coming out with offers.
“I am right now out of the market. It’s too risky to come out with export offers in the current volatile market because you never know when the producer or the buyer is going to back out,” one exporter said.
Producers will refuse to deliver if prices go up further, while the buyers or importers may refuse to take delivery if the prices suddenly slips and as such it is better to remain out of the market, he said.
Domestic offers for SiMn 60-14 jumped to INR94,500/t ($1,132.19/t) on 3 May, up 30%, from a low of around INR72,500-73,000/t ($868.54-874.53/t). Export offers for SiMn 60-14 jumped to $1,050-1,150/t FOB, from around $890/t FOB in the previous week.
Some offers for 60-14 grades were also heard at around $1,200/t FOB, though no deals were heard.
One unconfirmed deal by a trader for a small tonnage of 65-16 grade of SiMn was understood to have been finalised at $1,075/t FOB on 2 May, up from a deal of $968/t in the previous week.
Offers for 65-16 were heard at around $1,200/t FOB on 3 May, up from the previous week’s offer of around $990/t FOB.
Similarly domestic offers for ferro-manganese (FeMn 70%) jumped to INR95,500-96,000/t ($1,144.08-1,150.07/t), which was up 33% from previous week's offers in the range of INR72,000-72,500/t ($862.55-868.54/t).
Export offers for FeMn 75% firmed up to $1,250/t FOB, from a low of $990/t FOB in the previous week.
Activities in ferro-chrome (FeCr), used in stainless steel production, remained limited and prices eased to around INR106,000-107,000/t ($1,269.41-1,281.39/t), from the previous week’s levels of INR107,000-108,000/t ($1,281.39-1,293.36/t).
7 May 2024
BHP sought to reassure investors and regulators that it did not think negatively of South Africa, amid growing criticism over its $39bn takeover proposal for Anglo American.
The Australian mining giant’s unsolicited all-share proposal confirmed last week was contingent upon Anglo’s demerger of Kumba Iron Ore and Anglo American Platinum Limited, both South African-based assets.
Anglo’s board swiftly rejected the proposal, saying it “significantly undervalued” the London-listed company. In addition, the requirement to demerge its South African subsidiaries made it “highly unattractive,” said Anglo, whose biggest shareholder is South Africa’s Public Investment Corporation.
BHP said its proposal did “not reflect a view of South Africa as an investment decision and is based on portfolio and commodity considerations.”
“BHP believes this structure unlocks immediate value, delivering shareholders and stakeholders access to future growth opportunities and investment currently not available under the existing ownership structure.”
The miner’s comments were part of a “clarification statement” issued on Thursday, following sharp criticism from South Africa’s mining minister, as well as from several mining executives and industry experts.
Shortly after BHP’s announcement last week, Minister Gwede Mantashe told the Financial Times that South Africa’s experience with BHP was “not positive”, as the miner “never did much for South Africa” before it demerged its operations in the country as South32 in 2015. Mantashe later told Bloomberg that he wouldn’t support BHP’s proposal.
In response, a senior BHP delegation, including Melbourne-based CEO Mike Henry, travelled to South Africa this week to win over government officials, regulators and local shareholders, Bloomberg reported on Friday.
BHP’s campaign seems to be paying off with President Cyril Ramaphosa’s office earlier this week issuing a statement rejecting the portrayal of BHP’s proposal as a vote of no confidence on South Africa.
"The Presidency has noted with concern the emerging narrative around the proposed BHP Billiton transaction with Anglo American," the presidency said. "The Presidency rejects the notion that a commercial approach by BHP Billiton equals to a hostile environment for investors."
The proposed acquisition comes at a sensitive time in South Africa, with elections later this month and the ruling African National Congress (ANC) facing its biggest threat to its decades-long majority.
South Africa has become less and less attractive for foreign investment due to a worsening power crisis, systemic logistical issues, regulatory uncertainty and corruption. The Fraser Institute ranked the country 57th out of 62 global mining jurisdictions on its overall investment attractiveness. In comparison, Botswana was 10th.
As investment dries up, South Africa’s real mining output continues on a downward spiral, falling 13% on the year in 2022, according to the Minerals Council of South Africa.
Anglo has deep roots in the country, starting out with gold, diamond, platinum, copper and coal in South Africa more than a century ago. The miner employs 36,000 South Africans, and pays $1.2bn in taxes and royalties to the government annually.
Despite its rejection of Anglo’s platinum and iron ore businesses in South Africa, BHP could still end up with a footprint in South Africa through De Beers, with its Venetia diamond mine, and Samancor’s Hotazel manganese mine.
However, Anglo is considering a sale of De Beers with discussions already ongoing with potential buyers, reported McCloskey's sister publication, the Wall Street Journal last week.
As for Samancor, the Hotazel manganese mine is part of a joint venture with South32 that includes Australia’s Groote Eylandt Mining Company (GEMCO). Anglo owns 40% and South32 60%.
1 May 2024
Gustavo Petro won the Colombian presidential elections on 19 June 2022. In the run-up to the halfway point of his administration, the country’s energy industry is speaking out about the efforts to create Petro’s carbon-free dream.
“If there is one word that defines this legislature, it is chaotic. Their total political inability and lack of management,” Juan Camilo Nariño, president of the Colombian Association of Mining (ACM), told McCloskey.
Foremost in this “chaos” to manifest President Petro's decarbonization dreams is the new Mining Law, the draft of which was made public in February, but has yet to be sent to Congress for approval.
Running a close second is the creation of the state-owned company Ecominerales. The minerals and energy sector have viewed Ecominerales with acute suspicion and see it as a backdoor to expropriate current mining operations.
Petro’s administration has already added significantly to the industry’s financial burden through tax reforms that have added significant costs to bottom lines, already squeezed by falling prices.
Nevertheless, the Petro government is committed to moving towards the nationalisation of the industry with new mining legislation that also bars coal exploration and the creation of Ecominerales.
“With Ecominerales, the government wants to control coal production through this company. Thermal coal is going to be prohibited from a legal perspective in Colombia. That is something that is being done in secret,” warned Jose Zapata, a lawyer at Holland & Knight Colombia SAS at the McCloskey Coal Conference of the Americas in Cartagena this week.
Large, medium and small players have united in an effort to have a say in policy, understand and engage with the government to create policies that they believe work for all of Colombia. However, industry players said they have found the government deaf to their input.
“They don’t allow us to participate in the changes implemented. The associations sit down with the Government but in the end none of that is considered. Our role cannot be limited to mere discussions, it is necessary that what we tell them is considered,” said Zapata.
ACM’s Nariño for his part has accused the government of an “enormous lack of planning on the part of the government and its inconsistencies.”
He says that while the government claims to defend people who have fewer opportunities, there is no concrete plan regarding social and economic transition for the thousands of families that live off Colombian coal.
“It is forgotten the profound social dimension that coal has throughout the country. These inconsistencies are typical of a government that is not clear about how to manifest a plan,” he said.
McCloskey invited the government to speak at the event but only had a response less than a day before the conference was due to start. No one in the Colombian government was able to comment ahead of publication.
Prodeco mines
Nariño said the closure of the Prodeco mines is a perfect illustration of how much the coal economy influences the social reality of Colombia.
“Some 6,000 jobs were lost that no other economic sector has been able to generate again in the region. The economic and social dynamism that the coal industry represents for those regions wasn’t so tangible for us before Prodeco left, but that closure showed it to us.”
It is estimated that the coal sector generates approximately 130,000 direct jobs in the country, according to data from the National Mining Agency (ANM).
Even before taking office, Petro was insisting that the government suspend the sale of Prodeco mines previously held by Glencore.
Prodeco was Colombia’s third largest coal exporter in 2019, shipping 15.6 mt before dropping off to zero. At its peak, Prodeco exported 19.2 mt in 2016.
Demonising coal
Even as Petro’s government is taking swipes at the coal sector, the nation still relies on the fuel, not only in terms of its contribution to the national purse, but as an essential fuel to keep lights on.
Colombia is experiencing an unprecedented El Niño phenomenon, putting the country on blackout alert. Due to the drought, thermal power plants currently provide 45-50% of the energy consumed by Colombians, according to the Association of Electric Power Generators (Acolgen).
Thermal coal power plants have come in to support the lack of hydroelectric generation, with monthly coal consumption close to 0.5 mt, according to data from Fenalcarbon.
“Thanks to coal, Colombia has not gone out. Wrong measures cannot be taken that shut down our industry prematurely,” said Carlos Cante, president of the federation.
But that has not blunted the government’s opposition to the fuel.
“The only thing that is sustaining the industry right now is the faith of the miners. This government has demonized thermal coal,” a mining source said, adding that for many in the sector, the first half of Petro’s term has been a paradox, marked by paralysis in some areas and chaos in others.
“The granting of new mining titles is blocked, and exploration is not allowed. But if they don't let the industry move forward, they cause the paralysis of the sector."
With two more years of Petro's government ahead, many predict that this second half of his term will be “even worse”.
“You should expect anything from them, even if they finally manage to change the Constitution to perpetuate their hold on power,” the mining source said, noting Petro’s intent to changes in Colombia’s electoral system.
According to the latest polls, Petro would not win the next elections in 2026 given his 65% disapproval rating.
And that means there is hope for Colombia’s coal sector if it can hang on.
The new mining law would require four months of consultation with communities and another eight months to be approved by Congress.
That would mean the new code might be in place for a year before the next elections.
“Petro… has not known he can materialize his ideas. He has not managed to deliver anything he had promised in the campaign. This benefits us. Now we just must wait for two years to pass,” said Nariño.
But he warned 2024 is a critical year for the industry.
“The sector must fight. Many regions of the country depend on how this ends.”
Published by Lola Gonzalez
30 April 2024
BHP made one thing abundantly clear in last week’s $39bn takeover proposal for Anglo American - it doesn’t want to return to South Africa.
The Australian mining giant’s unsolicited all-share proposal was contingent upon the company’s demerger of Kumba Iron Ore and Anglo American Platinum Limited, both South African-based assets.
Anglo’s board swiftly rejected BHP’s proposal last week, saying it “significantly undervalued” the London-listed company. In addition, the requirement to demerge its South African subsidiaries made it “highly unattractive”, said Anglo, whose biggest shareholder is South Africa’s Public Investment Corporation.
BHP, the world’s largest miner, is considering making an improved proposal for Anglo, Bloomberg reported over the weekend. BHP has until 22 May to submit a formal bid.
“Is it an in-your-face statement that they do not want to operate in South Africa?” said Bruce Williamson, mining analyst at Johannesburg-based investment firm Integral Asset Management. “They might say there’s issues around competition…but the bigger picture might be that they just don’t want South Africa. This should be a wake-up call for us.”
South Africa has become less and less attractive for foreign investment due to a worsening power crisis, systemic logistical issues, regulatory uncertainty and corruption. The Fraser Institute ranked the country 57th out of 62 global mining jurisdictions on its overall investment attractiveness. In comparison, Botswana was 10th.
As investment dries up, South Africa’s real mining output continues on a downward spiral, falling 13% on the year in 2022, according to the Minerals Council of South Africa.
Analysts pointed to BHP’s aversion to Kumba Iron Ore as the clearest evidence it did not want to operate in South Africa. BHP, already a major producer of iron ore, would instead only keep Anglo’s Minas-Rio iron ore mine in Brazil if its proposal is approved.
Kumba, South Africa’s largest iron ore producer, has struggled over the past year due to severe rail and port constraints that have forced it to cut production, exports and jobs. Last year, its production at Kolomela and Sishen in the Northern Cape fell 5% on the year, with little improvement seen to 2026 due to the country’s systemic transport problems.
“Look at Kumba, it has suffered significant rail issues among other challenges. How valuable is a mine if you may not be able to rail your production to the port?” said Richard Cheesman, a partner at Urquhart Partners. “BHP wants to predominantly be in Tier-1 mining jurisdictions and South Africa unfortunately does not currently qualify as one.”
If successful, BHP’s acquisition would create much uncertainty over the future of Anglo’s 36,000 South African employees, as well as the $1.2bn in taxes and royalties paid to the government annually.
Anglo has deep roots in the country, starting out with gold, diamond, platinum, copper and coal in South Africa more than a century ago. It has since expanded to become one of the world’s largest international mining companies with assets throughout Africa, South America, Australia, Europe and North America.
"The condition by BHP that Anglo divests from the South African iron ore and platinum businesses is not completely unwarranted, given the two companies respective histories of divestment from South African operations," said Tiisetso Nkosi, a research director at McCloskey. "This could very well be the exodus of mining investment from South Africa, if our operating environment does not improve."
30 April 2024
Global manganese ore prices jumped sharply to fresh 2024 highs in the latest week, following the brief shutdown of Gabon’s key rail line due to a train derailment.
South Africa’s 37% Mn price jumped 18% on the week to $3.92/dmtu FOB, from $3.31/dmtu FOB in the previous week, according to market sources.
On a delivered basis, the 37% Mn price rose 14% on the week to $4.80/dmtu CIF Tianjin, from $4.22/dmtu in the previous week. For 44% Mn, the market surged 22% to $5.94/dmtu, CIF Tianjin, from $4.86/dmtu.
The market rallied on news that Gabon’s main manganese ore export line was shut on Friday due to a train derailment. The line was repaired on Saturday and operations have since resumed.
The incident comes as the market is already on edge following the halt in exports from South32’s Groote Eylandt Mining Company (GEMCO) in Australia last month. GEMCO is not expected to resume shipments until January-March 2025.
“The biggest reason for firmness in manganese ore offers is that South32’s supplies from Australian mines is unlikely to start before March 2025 and there is limited availability from South Africa,” said an Indian ferroalloys producer.
Another industry source expected manganese ore prices to remain firm until at least June. In India, Sandur Manganese and Iron Ores Ltd (SMIOR) only sold a third of its 60,000 t (18-35% Mn) on offer in its e-auction. The price for the 20,000 t sold was near the floor price set by India’s third largest manganese ore miner.
The rise in global manganese ore prices helped provide support to some Indian ferroalloy markets.
However, the domestic silicon-manganese market (SiMn) was unchanged with offers steady at around INR72,500-73,000/t ($869.27-875.27/t).
Export offers for SiMn 60-14 rose to around $890.00/t FOB during the week, from $860-870/t FOB in the previous week. However, most bids this week were at around $840-850/t FOB.
Offers for SiMn 65-16 grade jumped to $990/t FOB, from previous week’s $940-960/t FOB. Bids were, however, lower by around $30-40/t.
Similarly, domestic offers for ferro-manganese (FeMn 70%) remained firm and were offered in the range of INR72,000-72,500/t ($863.28-869.27/t), compared with previous week’s offers in the range of INR71,000-72,000/t ($851.29-863.28/t) in Durgapur and Raipur regions.
Export offers for FeMn 75% firmed up to $990/t FOB, from $920-940/t FOB in the previous week.
Offers for ferrochrome (FeCr), used in stainless steel production, eased to around INR107,000-108,000/t ($1,282.93-1,294.92/t) from last week’s INR108,000-110,000/t ($1,294.92-1,318.90/t).
23 April 2024
Transnet has fired the security firm responsible for protecting South Africa’s main coal export rail line, just seven months after being hired.
A joint venture between Servest, Amahlo Consulting, and Advanced Aerial was awarded a long-term contract in August to secure the North Corridor from cable theft and vandalism, which have significantly hobbled coal exports for the past three years.
The joint venture, however, failed to improve the security situation and its five-year contract was terminated for non-performance. It was given 60-days’ notice at the end of February.
Sources say the JV simply did not deploy enough physical resources on the ground, allowing the security situation to worsen on the 1,800 km rail line stretching from Waterberg to Richards Bay.
Amahlo Consulting appears to be a one-man operation without a footprint in the security industry. The firm made headlines in 2018 after it secured a ZAR60m ($3m) contract from a Gauteng government agency to create 75,000 job opportunities, but it delivered only 142 skills training opportunities. Earlier this year, a court ordered Amahlo to repay the Gauteng provincial government ZAR55m ($3m).
Sources say the growing dissatisfaction with the security performance was made known to the JV in weekly meetings, culminating with the termination notice at the end of February.
In response, the JV took Transnet to court to force the state-owned company to honour its long-term contract. But the court this month dismissed the case.
Following the JV’s firing, the coal industry has stepped in to help secure part of the line through a mutal cooperation agreement between the Richards Bay Coal Terminal (RBCT) and Transnet. RBCT, which is Africa’s largest coal export hub, depends solely on Transnet’s North Corridor for its coal supplies.
RBCT has helped to secure the corridor between Ogies in Mpumalanga and Richards Bay. It is up to Transnet to secure the remaining 1,000 km.
The RBCT arrangement has enlisted the services of Fidelity Security, the same service provider which has helped to secure the Cape Corridor, the main manganese export line.
Since the new service provider has come in, the number of crime incidents has decreased by 65%, Business4SA reported.
RBCT said that the number of train cancellations was decreasing, and coal was being delivered to the terminal with improved consistency.
According to Business Unity South Africa, rail rates in the last week of March was 1.413 mt of export cargo, representing Transnet Freight Rail’s "most substantial performance" in terms of volumes moved this fiscal year. In 2023, rail rates on the North Corridor were averaging at a 30-year low below 1 mt.
However, the interim arrangement with the industry is only temporary and Transnet has issued a request for proposals to the market to provide security to "various depots within the North Corridor" for a five-month period.
23 April 2024
South32 expects it will take nearly a year before it can restart manganese ore exports from Australia, as it works to repair key infrastructure damaged from last month’s cyclone.
Groote Eylandt Mining Company (GEMCO) halted production at its 6.0 mt/y mine after Tropical Cyclone Megan caused structural damage to its terminal, as well as issues at the mine. South32 owns 60% of GEMCO with the remaining held by Anglo American.
“Based on our preliminary schedule estimate, we expect to recommence wharf operations and export sales in Q3 FY25 (January-March 2025),” South32 said in its latest financial results. “Alternative shipping options are being evaluated to mitigate the impact of the wharf outage. These options may establish partial ore export capability.”
Shortly after the cyclone hit, the miner withdrew its 3.4 mt guidance for its share of GEMCO’s production in financial year ending 30 June. Last financial year, South32’s GEMCO output was 3.55 mt.
In the July 2023-March 2024 period, South32 produced 2.32 mt of manganese ore in Australia, down 13% from the previous year. Sales over the same period were up 7% on the year at 2.57 mt.
For South Africa, South32’s production guidance for the financial year remains unchanged at 2.00 mt. In the nine months ending 31 March, manganese ore production rose 8% to 1.64 mt, while sales increased 3% to 1.57 mt.
Its average ore grade sold was 38.7% manganese content during the July 2023-March 2024 period, down from 39.1% a year ago. For its Australian manganese, its ore grade was 42.6% compared to 44.1% a year ago.
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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