Covid impact, unlawful activities at logistics delivery drags down South32's aluminium sales

The global resources company, SOUTH32, stated that sales of aluminium and manganese from its South African operations shrank in the first quarter of its 2023 financial year due to port congestion and reduced third-party rail availability.

In comparison with the previous quarter, aluminium sales dipped 18% to 162,000 tonnes, while manganese sales narrowed by 8% to 473,000 tonnes.

As a result of Covid-19 absenteeism, a lack of parts and equipment, as well as constant theft and sabotage by criminal gangs, South Africa's state-owned rail and port operator Transnet has struggled to maintain volumes.

In the past, South32 has trucked manganese from its mines in the Northern Cape. In the event of a decline in manganese prices, this route may be less effective, and there may be more disruption to sales. After an approximately 15-day strike by unions earlier this month, Transnet declared force majeure. The force majeure was partially lifted on October 21.

South32 said, “We continue to monitor the situation closely and will seek to mitigate the potential impact on our aluminium sales during the December 2022 quarter”.

The Minerals Council said, "The strike cost South Africa R815 million in export revenue a day and described Transnet's rail and port problems as equivalent to the electricity crisis being suffered at Eskom.

As a result of this year's strike and Transnet traffic snarls, some R50 billion may be lost in annualised revenue, 43% more than last year's R35 billion. The council said this covers revenue losses of iron ore, coal, chrome, ferrochrome and manganese exports.

South32 said, "We had finalised "a new collective employment agreement" for three years to 2025 at Hillside Aluminium post the quarter end."

However, the mining company did not provide additional details. According to the National Union of Metalworkers of SA, South32 offered a 3.1% increase across the board and a 4% once-off cash payment on September 5.

Despite this, South32's production was robust. All operations except Illawarra metallurgical coal maintained their guidance. After the first quarter, the group forecasted a 13% increase in copper equivalent production in 2023.