Richards Bay: Increase In Throughput Growth Over Medium Term

Richards Bay is South Africa's largest port in terms of total tonnage, and a major outlet for South African coal for Chinese consumption. Established in 1976 for the export of the fossil fuel, the port has since grown and now also handles other bulk and breakbulk cargoes. Its grounds encompass the privately operated Richards Bay Coal Terminal, which is separate from the facility. In 2013 we forecast muted growth at the facility, though we believe its medium-term growth prospects are strong.

Short Term: Sedate Growth Forecast For 2013

In 2013 we forecast that the Port of Richards Bay will see 1.3% growth in total tonnage handled, to 92.36mn tonnes, a slowing in throughput growth from 2012, when volumes rose by 5.6% to 91.22mn tonnes. The port's throughput is almost completely geared towards the export of South Africa's considerable mineral wealth, and of this the major commodity handled at Richards Bay is coal, which made up nearly 75% of the total volume handled in 2012.

Our 2013 growth forecast is predicated largely on our Mining desk's outlook for South African coal exports, projecting that growth will be around the 1% mark, with few new projects due online over the year. The port does release monthly data, but with only January and February results released at the time of writing, it is too early to make a projection based on these figures. Nevertheless, the 2013 two-month throughput of 15.69mn tonnes is a 3.7% fall on the 16.29mn tonnes handled in the same period of 2012, appearing to support our view that growth will be sluggish at best this year. These monthly tonnage throughput figures include the weight of the containers handled, calculated at 13.5 tonnes per twenty-foot equivalent unit (TEU). However, given the small number of containers handled at Richards Bay, their weight is very small proportionally compared to the port's dry bulk throughput.

Slow Start To 2013
Richards Bay Monthly Tonnage Throughput, 2011-2013

Box handling at Richards Bay is a secondary consideration to the port's bulk handling role. In 2013 we forecast growth in throughput of 5.4% to 18,096 TEUs, not sufficient to recoup volumes lost in 2011 or 2012, when volumes dipped by 21.4% and 7.4% respectively. Given the low numbers of boxes handled at Richards Bay, throughput is highly erratic, making it particularly hard to forecast with any degree of confidence.

Medium Term: New Coal Projects To Boost Growth

South Africa is planning to enhance operations at the Port of Richards Bay, with an investment of ZAR3bn (US$0.37bn) over the next five years, according to public enterprises minister Malusi Gigaba. The funds will be used to add new loading and off-loading equipment, conveyor belts and other handling equipment to increase the terminal's handling capacity.

Growth Picking Up Over Forecast Period
Richards Bay Tonnage Throughput, 2008-2017 ('000)

These works will enable Richards Bay to compete for the expected rise in coal export volumes over the medium term. While we forecast slow growth in the port's throughput in 2013 and 2014 on the back of a death of new projects, over the rest of our forecast period, which runs to 2017, we envisage faster growth. A number of new South African coal projects are due to come online in 2015, and in 2016 we see scope for a number of new Botswanan projects using South African ports such as Richards Bay. While there is a chance some of these exports from Botswana will use the Namibian port of Walvis Bay, Richards Bay, on Africa's east coast, gives more immediate access to the Indian Ocean and trade routes to the demand markets of Asia.

In light of this, our 2015 growth forecast for Richards Bay tonnage is 4.6%, and in 2016 we forecast growth of 5.8%. Over the forecast period as a whole we project an annual growth rate of 3.9%, hastening towards 2017, when we forecast throughput of 110.38mn tonnes. The investment in the port by operator Transnet will help the facility cope with this demand growth, and ensure it remains attractive in the face of rising competition from Walvis Bay and the Mozambican port of Maputo. Maputo is actually closer to the Gauteng industrial hub in South African than Richards Bay and Durban and has been benefiting from South African coal volumes; from tonnage throughput of 6mn tonnes in 2005, Maputo handled around 12mn tonnes in 2011.

Long Term: New Coal Export Terminal Mooted

In the long term, BMI believes there is great scope for growth at the Port of Richards Bay to continue at a rapid pace. Investment by Transnet Freight Rail in South Africa's rail infrastructure, connecting the country's mining regions to export ports, should see volumes increase. Although volumes of coal, one of the port's primary exports, shipped to the West are falling, the economies of the East should plug this gap, provided there is no hard landing in China.

Erratic Container Handling
Richards Bay TEU Throughput, 2008-2017

Further upside risk over the longer term is provided from a new terminal mooted by South African state-owned transport infrastructure company Transnet. This would be part of the Port of Richards Bay, unlike the Richards Bay Coal Terminal (RBCT), which is a separate entity operated by mining majors Anglo American, BHP Billiton, Xstrata, Exxaro and Glencore. The fact that the RBCT is operated by major companies can make it hard for smaller mining firms to find export capacity.

Sudesh Maharaj, programme director for the expansion projects, said in November 2012: 'Transnet is busy investigating an open-access coal terminal for the unlocking of emerging or junior miners in the coal industry. This is mainly due to the situation that we have had up to now, where smaller miners can't mine until there is export capacity.' If the new facility is approved for development it could begin exporting in 2020, and construction would continue regardless of fluctuating coal prices: 'Long-term projects must continue irrespective of cyclical shifts in markets and economies,' said Maharaj.

In February 2013 Maharaj explained that the new terminal would cost ZAR15bn. Phase one would have capacity for around 14mn tonnes of coal a year, rising to as much as 32mn tonnes by 2040. This is part of a wider ZAR30bn investment plan for Richards Bay. The port will not get a new container facility, though it will be able to handle 100,000TEUs by 2020 under current expansion plans.

Despite these plans, BMI notes that there is risk to the projected long-term growth at Richards Bay, given risk to Transnet's capital expenditure programme reported in February 2013. Transnet's CEO, Brian Molefe has said that the ZAR300bn programme might have to be cut by ZAR50bn if economic growth disappoints or if strikes threaten the freight transport sector once again.

This article is tagged to:
Sector: Freight Transport, Shipping
Geography: South Africa

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