Transnet Freight Rail (TFR) said on Tuesday that it had lifted a force majeure on nine of the coal producers as they had signed a Deed of Amendment for the remainder of the contract period.
This follows TFR telling coal exporters in April that it would terminate their long-term railing agreements in terms of a force majeure, which it had declared due to cable theft and the inability to source spares for locomotives. Transnet woes have led companies, especially coal producers, to report that their performance was negatively impacted by Transnet.
In a statement, TFR said the amendment relates to contractual arrangements for the remaining term of the long-term agreement which expires in March 2024.
TRF said despite concerted efforts to conclude the negotiations in good faith, a settlement had unfortunately not yet been reached with some CEPs.
According to TRF, it has held several discussions with the CEPs relating to aspects of the contract that required attention to ensure that the North Corridor (the heavy haul line transporting coal and other commodities) remains competitive and sustainable.
“Critical aspects of the negotiation necessitated an understanding of the system capacity given the severe constraints TFR is faced with at present, such as the severe shortage of operational locomotives as a result of unfortunately protracted negotiations to reach a lawful settlement with OEMs (original equipment manufacturers) concerning the 1064 locomotive contract as well as the rampant cable theft and vandalism of key rail infrastructure on the corridor, which have been widely reported on.
“However, several other issues also place a constraint on the system, one of them being the permanent change in the sites from which coal is loaded for export,” TRF said.
TRF said it was now taking longer for it to collect coal from its customers, which reduced its throughput capacity.
“More crucially, some of the new sourcing areas are on an infrastructure network that has a maximum capacity of 20t per axle, compared with 26t per axle on the dedicated network. This means that TFR can only load 75 percent of the wagon capacity at any given time. This results in an erosion of capacity and increases operational and cost inefficiencies, the burden of which falls squarely on TFR,” it said.
TFR said it also seeks a fair and equitable tariff increase that accommodates the rising operational costs given the evolution of the coal mining industry.
“It is worth noting that the emerging miners have been subjected to annual tariff increases whereas those (major CEPs) locked into long-term contracts have not,” TRF said.
The company said discussions regarding the new medium to long-term contracts that would replace the current agreements would commence during this month, with those CEPs which had signed the Deed of Amendment to the current contract.
“What is needed at this time is for the parties to work together to tackle the challenges, not only for self-interest but for South Africa Inc at large,” TRF said.
BUSINESS REPORT ONLINE