Leonard Neill
SPOORNET'S HIGH transportation costs may force Billiton, the international metals giant, to relocate its South African manganese operation to Australia unless agreement can be reached to lower the costs, says Anton Fourie, finance manager at Metalloys, the company's manganese smelter operation.
Addressing the parliamentary committee on transport in Cape Town last week, he said that profitability in the last three years had been reduced to close to zero, with logistics accounting for 30% of the total costs.
Metalloys' costs of rail transport and handling its ferromanganese and silicomanganese output to port amounted to US $28 a ton against just $3 a ton for Billiton's Temco manganese smelter in Tasmania.
We are not proposing closing down the South African operation and moving to Australia, but it is an option, he said.
Spoornet, he said, penalises value-added products by charging a premium of 40% above the price it charges for carrying manganese ore from Billiton's Hotazel mining operation. Alloys are affected in this respect, even though two tons of ore are needed to make one ton of alloys. This, said Fourie, had encouraged them to send more ore to be refined offshore, but the group had 'burnt its fingers' in this regard with the Russian and Chinese toll-refiners.
The rail operator also charges Billiton 60% more for carrying manganese ore to the coast than it charges rival operator Iscor.
We are negotiating in an effort to close that gap, said Fourie, warning that if it did not succeed and decided to relocate to Australia, direct and indirect job losses would total more than 3000 apart from Spoornet losing considerable revenue.
Fourie accepted that the South African operation was at a geographic disadvantage because the mine and smelter were a long way inland, whereas the Australian mine and smelter were both on the coast.
The South African operation, he said, had radically reshaped itself to slash costs in areas where it could exercise control, but transport and logistic costs remained a millstone around the company's neck.
In some instances the cost of freight is four times the cost of actually getting the ore out of the ground.
Copyright Now Media (Pty) Ltd
No article may be reproduced without the written permission of the editor
To respond to this article send your email to joyo@nowmedia.co.za
