South African logistics group Transnet may only move around 68 million tonnes of coal for export this financial year despite an expanded rail capacity as producers limit exports due to low prices, the head of its freight rail unit said on Wednesday.

Transnet has been investing heavily to upgrade its ageing infrastructure and push more coal through the Richards Bay Coal Terminal on South Africa’s Indian Ocean coast before it gets shipped off to coal-hungry markets in Europe and Asia.

“We would like to do 73-75 million tonnes, but market conditions dictate what will ultimately happen,” Siyabonga Gama told Reuters on the sidelines of the company’s results release.

Sluggish spot demand in India and China, two big buyers of South African coal, and abundant availability of cheaper coal from other countries have weighed on prices, pushing them to levels last seen in late 2009.

“We’ve got capacity to move about 76-78 million tonnes, but just based on the first half, we will probably end at around 68 million tonnes,” Gama added.

Transnet’s financial year runs until end-March.

The state-owned group transported 67.7 million tonnes of export coal in its last financial year, supplied by coal majors including Anglo American, Exxaro, Sasol , BHP Billiton and Xstrata Coal .

Transnet in April launched a 300 billion rand ($34.74 billion), seven-year capital expansion programme meant to upgrade its rail and port infrastructure and boost capacity, especially on the lines carrying coal, iron ore and manganese.

Part of the plan is to build a railway line linking the ports with the Waterberg coal fields, seen as the next major coal hub as reserves in the Witbank area near depletion.

Gama said Transnet was already in talks with several key producers to sign long-term contracts for the line, expected to be built by 2015 and initially carry around 23 million tonnes.

“On average, we are looking at 10-year contracts,” he said.

He expects to have the deals in place by June next year. ($1 = 8.6358 South African rand) (Reporting by Agnieszka Flak; editing by Keiron Henderson)

 

 

Source: http://af.reuters.com