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Transnet to double iron-ore rail capacity in South Africa

It is reported that Transnet plans to almost double capacity on its South African iron-ore rail line as the state owned operator looks beyond a slump in prices for the steelmaking ingredient and bets miners will raise production.

Mr Siyabonga Gama, CEO of Transnet Freight Rail, said in an interview in Bloomberg’s Johannesburg offices on August 13th that “Post this commodity crisis, iron ore will grow. So we will have a dedicated channel. Our philosophy is that we must create the capacity ahead of demand.”

He said that “TFR, as the unit is known, plans to raise capacity on the line to as many as 105 million tonne annually from about 60 million tonne.”

The 861 kilometre track links mines in Northern Cape, where Anglo American’s Kumba Iron Ore unit runs Sishen, Africa’s biggest operation for the material, to Saldanha, a port on the southwestern coast.

The country is the continent’s largest producer of the mineral.

Iron ore has fallen 31% this year as companies from BHP Billiton to Rio Tinto raised output, resulting in a supply glut.

The economy of China, the biggest buyer, is forecast to expand at 7.4% this year, the weakest pace since 1990.

Still, upgrading the line forms part of Transnet’s ZAR 210 billion plan to revamp rail after decades of underinvestment.

Mr Gama, who worked at JPMorgan Chase in New York and at Standard Bank before joining Transnet, said that “We invest for the long term. There will always be short-term cyclical shocks. For us, we need to understand more the trended projections and outlook from a global perspective.”

He didn’t provide a time line for the increase to 105 million tonne.

Capacity will increase to 82.5 million tonne by 2018.

TFR is struggling to meet the rail-transport needs of miners of manganese, another raw material used in steel.

According to the US Geological Survey, South Africa has the world’s largest known reserves and is the biggest producer.

Assmang, a unit of Johannesburg-based African Rainbow Minerals, Samancor Manganese, owned by Melbourne-based BHP Billiton, and Anglo American are the three main producers of the mineral in the Kalahari Basin region.

The country exports about 10.5 million tonne of the commodity annually, with 3 million tons being transported by truck to ports at Richards Bay, Durban and Port Elizabeth, Gama said.

Transnet will spend about ZAR 16.9 billion on rail lines from the Kalahari Basin to a new, dedicated manganese terminal at the southern port of Ngqura, next to Port Elizabeth.

The total cost of the project is about ZAR 26 billion.

Mr Gama said that “After completion, the company will be able to handle about 16 million tonne of the material annually from existing capacity of 5.5 million tonne. By 2019, everybody should be able to do what they can do in terms of mining capacity. We want to free the logistics backbone of the country so that companies can compete and become world-class in their markets.”

South Africa is the continent’s biggest coal supplier, with most production in the eastern Mpumalanga province, where reserves are declining.

Companies are now developing the largely untapped Waterberg Basin in the northern Limpopo province, which contains about 75 billion tonne of coal, or 40% of South Africa’s resources, according to state power utility Eskom.

TFR plans to spend about ZAR 2 billion boosting capacity in the area to as many as 26 million tonne by 2018 from 3 million tonne now and has signed memoranda in which 15 million tonne to 18 million tonne have been taken up, Gama said.

Source – www.iol.co.za

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