Metals News
Xstrata, Kumba Hurt by South African Transport Strike (Update1)
industry news
May 13,2010

May 12 (Bloomberg) -- Xstrata Plc, ArcelorMittal South Africa Ltd. and Kumba Iron Ore Ltd.'s operations in South Africa are being hurt by a transport strike that intensified today, choking rail and port shipments of iron ore and chrome.

Ports at Durban, Richards Bay, Saldanha and Cape Town are "severely" affected by the strike, with a backlog of container shipments building up at each, said Pradeep Maharaj, Chief Executive for Human Resources at state-owned ports and rail operator Transnet Ltd., by phone from Johannesburg today.

About 40,000 of the utility's 54,000 workers are on strike, according to the United Transport & Allied Workers Union. South Africa is the largest supplier of coal to European power plants and the world's biggest producer of manganese and ferrochrome. Transnet operates the nation's main metal and grain lines, as well as a pipeline that's Johannesburg's chief source of fuel.

Xstrata, the world's No.1 exporter of thermal coal, declared force majeure on shipments of ferrochrome and chrome ore because of the strike, while Anglo American Plc's Kumba Iron Ore Ltd. said it's been "quite severely" affected. Samancor Ltd. declared force majeure on exports of ferrochrome, Reuters reported, citing unidentified traders.

The approximately 800-kilometer (500-mile) iron-ore rail line is "virtually at a standstill," according to Utatu General Secretary Chris de Vos.

Dramatically Affected

ArcelorMittal South Africa, the country's largest steel producer, said deliveries of iron ore and coking coal to its mills have been "dramatically" affected by the strike. The steelmaker is relying on its stocks of the materials, "which are reducing," spokesman Julian Gwillim said from Johannesburg.

Utatu, Transnet's largest union, today joined the strike started by the South African Transport and Allied Workers Union on May 10. The unions are demanding a 15 percent wage increase, compared to Transnet's offer of 11 percent, twice the country's inflation rate.

While Transnet is concerned about the impact of the strike on both the company and the economy, agreeing to union demands would result in it having to raise prices or even cut jobs, it said in an e-mailed copy of an open letter to the unions.

Richards Bay Port, South Africa's biggest bulk export facility, has been partially closed by the strike, said two port agents. The multi-purpose terminal, which handles general cargo including ferrochrome and other commodities, has been halted and loading at the dry bulk terminal has been hindered, said the agents, who declined to be named because Transnet hasn't yet disclosed the impact of the strike.

Coal to Europe

The privately owned Richards Bay Coal Terminal, which ships most of the nation's coal destined for Europe, hasn't been affected, Chief Executive Officer Raymond Chirwa said by phone. Rail lines to the terminal are undergoing scheduled maintenance work, minimizing the impact of the strike, he said.

Exxaro Resources Ltd., a coal producer, has sufficient stocks at the terminal to meet current demand, Mxolisi Mgojo, general manager of coal, said in an e-mailed response to queries. The company will "make further decisions on production volumes should it become necessary."

While many of Transnet's operations have been halted by the strike, the company is still loading stocks of export goods, said Maharaj. "We are ensuring that those commodities destined for export markets are prioritized," he said. "Stocks were built up in anticipation of the strike."

Soccer World Cup

The South African Petroleum Industry Association, whose members include BP Plc and Royal Dutch Shell Plc, are working to limit any inconvenience to the public, Sapia Director Avhapfani Tshifularo said by phone today. South Africa hosts the Soccer World Cup from June 11.

Sasol Ltd., which supplies 60 percent of the jet fuel used at South Africa's biggest airport, OR Tambo in Johannesburg, is monitoring the situation after boosting stocks last week in preparation for the strike, it said in an e-mail.

Production at Sapref in Durban, South Africa's biggest refinery, hasn't been affected, it said by e-mail. Shell referred queries to Sapia, while no one from BP was available for comment. Shell and BP own Sapref.

Not all of Transnet's workers can afford to strike and Utatu is concerned about intimidation, De Vos said. South Africa's Labour Court ordered Satawu to cease all violence, Transnet said yesterday. Thirteen workers were arrested in Durban during a protest on charges of public violence, assault and intimidation, it said.

The Federations of Unions of South Africa, the country's second-largest labor federation, has asked the Commission for Conciliation, Mediation and Arbitration to resolve the strike, which it says is harming the economy, it said in an e-mail. BHP Billiton Ltd., which produces aluminum in South Africa, has experienced a "very limited" impact by the strike, said spokesman Illtud Harri in an e-mail. Papermaker Sappi Ltd. hasn't been affected, said Corporate Affairs Manager Andre Oberholzer, while rival Mondi Ltd. hasn't seen any impact, it said in an e-mail.

production cut suspension
For queries, please contact Frank LIU at
For more information on how to access our research reports, please email
Related Price

No Data