SA’s Transnet declares power majeure on coal contracts, Thungela says

South Africa’s state-owned logistics agency Transnet has declared power majeure and is in search of to terminate long-term coal transportation agreements, thermal coal producer and exporter Thungela Resources mentioned on Thursday.

Despite Thungela saying the event wouldn’t materially affect its 2022 manufacturing forecast, its shares fell 7.8% by 0945 GMT, their greatest fall in a month.

Transnet didn’t instantly reply to a request for remark.

Large-scale theft of copper cables, inadequate upkeep, and an absence of locomotives have crippled Transnet’s freight rail community utilized by coal and iron ore miners to move their minerals to port.

“Transnet believes that these circumstances will continue to detract from its ability to perform for at least the next six months and that accordingly Transnet is under force majeure,” Thungela mentioned in an announcement.

Triggering a power majeure clause in contracts permits sure phrases of an in any other case legally binding settlement to be ignored due to unavoidable circumstances.

Thungela mentioned Transnet on April 8 notified coal exporters of power majeure and “expressed a desire” to terminate its long-term coal transportation agreements.

The coal exporters are participating with Transnet to “clarify the contractual position” and make sure the stability of coal deliveries to make the most of robust demand for South African coal, Thungela mentioned.

Coal producer Exxaro Resources final week mentioned it had obtained “numerous” requests from European international locations desirous to signal provide contracts, after the European Union proposed sanctions on Russian coal.

Both Exxaro and Thungela have mentioned Transnet’s points constrain their capacity to ramp up coal manufacturing to satisfy the brand new demand.

Last yr, Transnet railways delivered 58.3 million tonnes of coal to the Richards Bay Coal Terminal on South Africa’s east coast, considerably underperforming its annual capability of 77 million tonnes.

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