Glencore is the latest coal miner to launch a retrenchment process due to an inability to transport coal for export and declining coal prices.
Global commodity trading giant Glencore has begun a retrenchment process at its iMpunzi coal complex in Mpumalanga, which has 1,138 permanent employees.
New24 reported that the general manager of iMpunzi, Hlayiseka Chauke, said Transnet Freight Rail’s poor performance was the primary consideration behind the retrenchment process.
Transnet’s performance has been poor since the beginning of 2021, with export volumes railed to the Richards Bay Coal Terminal dropping from as high as 80 million tonnes to about 50 million tonnes in 2022.
In response, many miners chose to truck coal to Maputo, Durban, and Richards Bay. However, this has become unsustainable following a decrease in the price of coal to an average of $100 per ton in 2023 from $200 per ton in 2022.
“This directly impacts iMpunzi Complex in that there are insufficient trains available to move all the export product to the port, and trucking has become economically unsustainable due to lower prices,” Chauke said.
iMpunzi has an annual capacity of 10.3 million tonnes but can only transport 6 million tonnes via rail for export. Chauke said this is unsustainable.
Glencore’s job cuts come after fellow coal miner Seriti Power issued a Section 189 retrenchment process at its Klipspruit colliery, affecting 605 workers.
Seriti lamented its inability to transport coal by rail to South African ports for export, hampering the production at its mines.
“Stockpiles at our export mines remain high while stockpiles at Richards Bay Coal Terminal remain low due to persistently low export coal railings to port,” it said.
Seriti’s chief people officer, Ndumi Khoza, said despite efforts to cut costs over the past five years, the colliery is not commercially viable and can become a financial risk to Seriti Group.
“If no action is taken, Klipspruit will lose between R657 million and R949 million in the 2024 financial year alone, which puts the whole group at a huge business risk.”
Mining companies have previously warned trade unions of possible job losses as they cannot get their commodities to market due to Transnet’s deteriorating rail infrastructure.
National Union of Mineworkers representative Thapelo Malekutu said that unions have already been informed about retrenchment processes from mining companies.
Despite unions’ best efforts, job losses are unavoidable as Transnet’s decline is accelerating and showing no signs of recovery.
Malekutu acknowledged that miners could not get their commodities to market cost-effectively.
He noted that Richards Bay Coal Terminal is operating at around 50% of its capacity of 91 million tonnes. The volume exported is expected to be below 50 million tonnes in 2023.
More broadly, freight transported on South African railways has decreased from 230 million tonnes in 2017 to 179 million tonnes in 2022.
Mining companies estimated that they lost R150 billion in revenue last year from Transnet’s inefficiencies.
Malekutu complained about the lack of urgency the matter was receiving from the government, especially Transnet.
“They always have plans for everything, but implementation and urgency are always a problem.”