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SA $18bn train plan lifts coal exports

It’s a massive improvement – Van der Merwe.

In more than 40 years driving trains in South Africa, Jacobus Cornelius Van der Merwe has never seen anything like the Shongololo.

The train, whose name means millipede in Zulu, carries 200 coal wagons, is as long as eight Eiffel Towers laid end-to-end and can haul 16,800 metric tons of coal at 80 kilometers per hour (50 miles per hour) non-stop to the country’s main export port.

“It’s a massive improvement,” Van der Merwe, 59, said of 580-kilometer (360 mile) journeys from mines in Mpumalanga southeast to Richards Bay Coal Terminal on the coast, without having to change locomotives because some lines use alternating current and some direct. About 110 dual-powered trains made by Toshiba Corp. been put in service since 2009, while diesel locomotives on the coal route will be replaced with General Electric Co. models.

The Shongololo is part of a R201 billion ($18.48 billion) rail overhaul and expansion plan aimed at boosting exports of coal, manganese and other commodities from Africa’s biggest economy. It’s being rolled out by Transnet SOC Ltd., the state-owned ports and rail operator, tapping the expertise of GE, Bombardier Inc., CSR Zhuzhou Electric Locomotives Co. and China CNR Corporation Ltd to manufacture the locomotives locally and increase freight capacity.

Biggest Terminal

While South Africa is the world’s sixth-largest coal exporter, the country hosts the biggest single-site terminal for the fuel. The Richards Bay Coal Terminal, located on the northeastern coast of the country has yet to match its annual capacity of 91 million tons because it says the coal couldn’t get there.

Commodities exports in Africa’s biggest economy rose 5.6% to 384 billion rand in 2013, according to data from the country’s Department of Mineral Resources, and the investment is a bet on further growth. South Africa shipped 75% of its coal exports to Asia and 21%to Europe in 2013, according to data from the terminal’s website. A drop in coal demand could slow the expansion plans with companies shipping less.

“The problem with infrastructure is if you are in the middle of building the railway you can’t just stop,” Ntlai Mosiah, head of power and infrastructure and client coverage in South Africa at Standard Bank Group, said in a March 3 interview.

AC, DC

Most of South Africa’s coal is mined in Mpumalanga province, about 300 kilometers east of Johannesburg, by companies including BHP Billiton Ltd. and Glencore Xstrata Plc. Before the Shongololo, trains had to stop at Ermelo, the country’s biggest rail hub for coal, switching between direct current and alternating current locomotives to continue the journey to the port. Ermelo handles about 7,000 jumbo wagons a day, according to Transnet.

The currents are different because Mpumalanga, home to the country’s richest coal mines, is located in the northern region formerly known as Transvaal, where the Afrikaners who settled there used a different current than what was developed in Richard’s Bay under a British colonial influence.

Transnet’s upgrades have already shown results, delivering 6.9 million tons of coal to the terminal in August, the best month in two years. The terminal shipped about 70 million tons of coal last year, a record.

Transnet awarded a R2.6 billion contract to China’s CSR Zhuzhou for 95 locomotives, 85 of which will be built at Transnet Engineering’s unit in Pretoria, the capital.

20,000 Kilometers

The Chinese locomotives will mostly be used to haul manganese, South Africa’s seventh-biggest commodities export, from Postmasburg in the Northern Cape province to Port Elizabeth and the planned Ngqura terminal, both on the southern coast, helping to boost exports from 5.5 million tons to a potential 16 million tons over the next six years, according to the company.

“The Chinese are amazing,” Brian Molefe, CEO of Transnet, said in an interview in Johannesburg in February. “They showed us these excellent locomotives. They could deliver about 14 months before everyone.”

Transnet is improving more than 20,000 kilometers of track, a project that includes replacing wooden ties with concrete ones along the rail lines. This will let the Shongololo, which carries eight AC/DC locomotives and 200 jumbo wagons stretching 2.5 kilometers, shave the journey to Richard’s Bay to eight hours from 10.

Van der Merwe got his first job as an assistant to the train driver in 1971 at age 16, as South Africa belatedly introduced diesel locomotives to replace coal-fired engines.

Speeding Trains

“It’s crazy,” he said in a phone interview. The diesel- powered train carried 40 wagons of coal, at top speed of 50 kilometers per hour. The Shongololo, he said, pulling five times as many wagons, can cruise at 80 kilometers per hour.

That speed will be needed as competitors gear up. Vale SA, based in Rio de Janeiro, Brazil, has budgeted $4.5 billion for a railway line and a port in Mozambique. By 2017, Vale will transport 22 million tons of coal a year, it said in an e-mailed response to questions March 14.

Botswana, with 200 billion tons of coal reserves in its central region, needs $33 billion in rail network investment to ship the fuel, according to its Chamber of Mines. The landlocked country plans to export 65 million tons when the 1,500 kilometer Trans-Kalahari railway, linking coalfields to the port in Walvis Bay in Namibia, is completed in five years.

While other coal producing countries grapple with lack of infrastructure, the South African economy is set to benefit as the Shongololo displaces trains that date back to the 1980s.

“There had not been any major capital expenditure, at least of scale, in the last 40 years,” Molefe said. “So we have in Pretoria, a modern building, a bunch of young engineers and their mandate is to resolve port-rail related challenges. I’m sure we can crack it after a while.”

©2014 Bloomberg News

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