South Africa’s largest iron ore producer, Kumba Iron Ore, has announced a drastic cut in its production and sales targets for the next three years, citing ongoing challenges with the country’s rail and port infrastructure.
The company, which is a subsidiary of global mining giant Anglo American, said on Friday that it expects to produce between 35 and 36 million tons of iron ore this year, down from its previous forecast of 35 to 37 million tons.
According to a report by CNBC Africa, It also lowered its production outlook for 2024 and 2025 to 35 to 37 million tons per year, from 37 to 39 million tons and 39 to 41 million tons respectively.
The revised targets reflect the impact of persistent logistics constraints, which have resulted in a 15% decrease in iron ore railed to port since 2019, Kumba said.
Transnet, the state-owned freight rail and port operator, has been struggling to haul minerals and other commodities to export markets due to locomotive shortages, cable theft, vandalism, and strikes. In October, Transnet workers went on a two-week strike over wages and working conditions, disrupting the transport of coal, iron ore, and other goods.
Kumba said the strike had reduced its sales by about 1.5 million tons in the third quarter, and that it had also faced equipment breakdowns and weather-related disruptions at Saldanha Port, the main outlet for its iron ore exports. The company said it had slowed down production at its Sishen and Kolomela mines to cope with the excess stockpiles at the mines, which had reached 9 million tons by September.
Kumba’s chief executive, Mpumi Zikalala, said the company was working closely with Transnet to address the logistics issues and to improve the efficiency and reliability of the rail and port system.
“We are confident that Transnet will deliver on its commitments to restore rail performance to the required levels and to increase port capacity to enable us to grow our production and sales in line with our potential,” she said.
The company said it was targeting up to 3 billion rand ($159 million) in cost savings in 2023, and had reduced its capital expenditure guidance for the year by about $105 million to between $475 million and $530 million.
Anglo American, Kumba’s parent company, said on Friday that it was preparing to freeze spending on growth and widen job cuts in South Africa, including mothballing some higher-cost platinum mines.
The global mining giant also said it aims to cut capital expenditure by $1.8 billion by 2026, as it grapples with a fall in demand for most of the metals it mines and a huge writedown for its British fertiliser project.
The company said it continued to see strong demand for its high-quality iron ore products, which have lower impurities and higher iron content than the average ore, and which can help reduce carbon emissions in the steelmaking process.
Kumba said it achieved an average realised price of $181 per wet metric tonne (wmt) for the first nine months of the year, 17.5% above the average benchmark price of $154 per wmt.
