Port congestion and incompetence taking its toll on exports

Port congestion is quite common in container terminals around the world and many are attributing it to the increase of container ships which has grown 1 452.68 % in the last 50 years. To avoid a long port stay, terminals were pressed to use more gantry cranes and labour to complete the loading and discharging operations quicker.

However, the increase in containers coming off a ship also requires the container yard (CY) to be able to clear the containers with the same speed. If the CY is unable to handle this influx due to slow productivity or insufficient chassis, then the movement of containers out of the yard will be slow which means that the container yard will reach capacity quickly.

Added to this, when truckers come to pick up import containers when the container yard is full to capacity, there could be multiple movements/shuffles within the terminal to get to the containers, the truckers want.

Recent congestion experienced across South Africa’s major ports has severely impacted the country’s imports and exports operations, with large local retailers such as Pepkor Holdings reportedly having up to 700 million rands worth of stock stuck at sea during November and December.

Backlogs outside the Port of Durban reached a crisis point between the 23rd and 30th November 2023 when an estimated 79 vessels and more than 61 000 containers were forced to remain at outer anchorage due to operational challenges, equipment failures, and bad weather at the port.

The Port of Cape Town has also had its fair share of recent logistical woes, experiencing similar delays at its Container Terminal. This, in turn, led to significant congestion along the Eastern Cape coastline, with an estimated 4 ,000 containers said to have been stuck outside the Ports of Ngqura and Gqeberha in late November. While the congestion has begun to ease at our ports, reports indicate that it will take until mid-2025 for the Port Terminals to regain optimum functionality.

SOUTH32 second quarter and half year production report
SOUTH32 said port congestion at Richards Bay port had contributed towards a $275 million working capital build up at the midpoint of its 2024 financial year.

Commenting in its second quarter and half year production report, South32 said the port congestion was due to the timing of shipments from Hillside Aluminium. “We expect to complete additional shipments from Hillside Aluminium and drawdown our aluminium inventory to normalised levels during the March 2024 quarter,” the group said.

Aluminium sales decreased by 8% in the December quarter as three shipments totalling approximately 40 000 tons were delayed to January 2024, the group said. At 327 000 tons, half year sales from Hillside were three percent lower year-on-year.

The Richards Bay port has long struggled with capacity problems, largely owing to difficulties at the state-owned Transnet, a rail and ports company. In December, Transnet stopped trucks carrying coal to its Richards Bay terminal after reporting unprecedented traffic. By January, the situation was known to have eased.

South32 described its second production quarter as “mixed”. Zinc and nickel output increased a fifth, and silver production was higher, but production guidance was reduced at Brazil Alumina, Mozal Aluminium and at Sierra Gorda where molybdenum output was also reduced.

The outcome as a whole was a 3% reduction in group copper equivalent production guidance for the 2024 financial year ended June 30. Shares in South32 were 2% lower in Johannesburg on Monday and fell 2.75% on the Australian Securities Exchange. On a one year basis, the share is 32% lower.

Graham Kerr, CEO of South32 forecast a 7% improvement in production and cost controls that would “capture higher margins” in the second half of the year. Critically, he said some commodity prices would strengthen.

Aluminium prices ex-Hillside have fallen 9% in the last year while manganese prices from South32’s Northern Cape operations are 15% lower. Prices from metal produced by South32’s Mozal Aluminium in Mozambique is also lower, compounded by below specification production for 60% of metal in the second quarter, attracting lower prices.

South32 said that metal quality was expected to “progressively improve to LME-grade quality during the June 2024 half year.”

Mozal Aluminium is rebuilding production in terms of a recovery plan after a fatal injury. Crane availability was reduced as part of this work which resulted in some 73 pots being taken offline. As a result production guidance from Mozal Aluminium was reduced 12% to 320 000 tons for the year.

Manganese ore guidance has been maintained subject to continued trucking of material from its operations to Richards Bay. Trucking ore is more expensive than rail but South Africa’s Transnet is struggling to provide sufficient wagons.