Speakers from Transnet and SA’s dedicated coal export terminals highlighted plans for expansion at last week’s annual IHS Markit South African Coal Export Conference 2017 in Cape Town.

They were keen to show that coal companies would not be caught in the same squeeze they were in during the last commodities boom.

In the 2002-08 commodities boom, SA’s coal producers were unable to take full advantage of high prices because Transnet could not rail expanded volumes to the privately owned Richards Bay Coal Terminal (RBCT) as a result of years of underinvestment at the utility.

But this year, as prices have started to climb to about $86 to $88 per tonne from RBCT, compared with below $50 per tonne a year ago, the constraint may come from underinvestment by coal miners, partly as a result of regulatory uncertainty.

The likelihood of the government declaring coal a "strategic mineral" was raised at the conference, although there is no indication if this would entail a cap on prices or exports.

Brian Monakali, GM of capital planning at Transnet, said the rail utility had made plans to create an annual capacity of 136-million tonnes on the coal line from Richards Bay to Mpumalanga, the Waterberg and Botswana.

 The coal capacity on the Mpumalanga to RBCT line is about 81-million tonnes and on the line between the Waterberg and Ermelo will be upgraded to 6-million tonnes per year by 2018. Transnet transported 72.5-million tonnes between Mpumalanga and RBCT in the 12 months to December, said RBCT CEO Alan Waller. RBCT had studied expanding the port’s capacity to 110-million tonnes per year from the current 91-million tonnes per year, when demand justified it.

Transnet commercial GM Divyesh Kalan, who told the conference he would be leaving Transnet after many years, said the company was working on a phrase three expansion to double the Waterberg capacity to 12-million per year by about 2020. He said beyond 2020, Transnet could expand the capacity of the line to 24-million tonnes per year if there was sufficient demand, but a new line would have to be built to accommodate more than 24-million tonnes a year.

Transnet has previously referred to plans to expand the line to 27 megatonnes per year.

Monakali said even when taking into account the R1bn cost of building a 3km to 4km bridge across the Limpopo River, the R32bn cost of a rail link to connect Botswana to RBCT was the cheapest of the options considered. These had included rail lines to Walvis Bay, lines through Mozambique to a new planned port or lines to Saldanha Bay.

Kalan said Transnet conducted an exercise in 2016 with owners of coal prospecting and mining licences in the Waterberg to examine their project status, funding and off-take agreements to inform its own investment decisions. The company had then moderated its plans, taking likely developments into account. It is close to concluding contracts with producers for 8-million to 10-million tonnes per year on the line.

He declined to give a figure for the first three phases of investment to 12-million tonnes per year, but said Transnet had managed to reduce that cost by about 20% from its projections.

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