Logistics News - Week 36

Good morning

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When you read the first story, in which I have combined the headlines, Transnet in debt and the reported loss, we need to read and understand that last year, they reported an R5bn profit. The port is the main artery in our country, you will see in the report that they are taking action to get this back on track. A port cannot operate without being able to support itself, we need to keep a close eye on this as this was the preverbal jewel in the crown, it was one of the functioning SOEs that supported all the others. There is no crying wolf, it is rather a stern lesson on making decisions for any business, it needs to be done with the utmost attention to detail and the possible consequences of uncalculated decisions. Unfortunately, we are back to?stage 6?loadshedding, coupled with a big fuel increase, which is pushing the logistics sector and our economy into somewhat of a crisis.

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NEWS

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Transnet in debt crisis - Transnet reports R5.7bn loss for 2022/23 financial year

State-owned logistics company Transnet reported a R5.7bn loss in the financial year that ended in March, compared to a R5bn profit the previous year. This is after rail constraints hit volumes moved by Transnet Freight Rail (TFR). A shortage of locomotives, underinvestment in maintenance and theft, including vandalism, had a knock-on effect on TFR during the year under review.?Transnet said TFR normally contributes between 47% and 50% of its revenue. However, the challenges faced by its rail division had a profound impact on the group.?“The approximate 43% contribution to Transnet’s revenue in the year under review shows the poor performance achieved in the last financial year by TFR,” it said.

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Transnet CEO Portia Derby?delivers the company’s annual results, in Kempton Park, Ekurhuleni, September 1. Image:?Alaister Russell

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Portia Derby, group CEO of Transnet, has admitted the underperforming rail and ports entity is in crisis and is battling to service its R130bn debt pile.? In a review of the financial and operational performance for the 2022/2023 financial year, released on Friday, she said the purchase of 1,064 locomotives in 2014 for R54.5bn was based on a wrong assumption that the economy would grow by 5% per year.? “This means that we incurred debt that we are now unable to service without compromising the business, as the anticipated revenues have not been forthcoming. “Add Covid and the diminishing locomotive availability to this and you have a debt crisis. There is, therefore, no mystery to our financial challenges. The recent poor financial performance of the business worsens what is already a dire situation,” she wrote. Derby said the company exported less coal as it had suffered a 25% reduction in the available locomotive fleet in addition to theft and vandalism of key infrastructure. “It has been a harrowing couple of years, it has been a harrowing three years. Much has happened to us not only in South Africa but particularly in Transnet.”

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Transnet has borrowings amounting to R130bn. Ratings agency S&P Global cautioned in January that the parastatal’s delicate financial position meant that it has not met its cash interest cover metric for some lenders.?On Friday it announced it had swung to a R5.7bn loss for the year ended March on the back of an extremely poor performance by Transnet Freight Rail (TFR). Rail volumes dropped by 13.6% from 173Mt in 2021/2022 to 149Mt in the period under review. The company blamed a shortage of locomotives, cable theft, infrastructure vandalism and the April 2022 floods in KwaZulu-Natal for TFR’s woes.? A stern public enterprises minister Pravin Gordhan has now tasked the new board with developing an urgent strategy to turn around its operational and financial position and report back to him within three weeks.?“Transnet is at an inflection point. The deterioration in its operational and financial performance will be stopped. Nothing will get in the way of effective implementation of a radical plan.”?He has instructed the board to conduct a thorough review of the executive management “with a view to establishing whether persons with the right skills are optimally utilised to deliver on the mandate”.?

Source: Sunday Times

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Fuel price hike

According to the Central Energy Fund (CEF), the under-recovery on petrol indicates an increase in the fuel price, across all options, on Wednesday the 6th, these are the official prices released by CEF

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FUEL PRICE INCREASES

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???Petrol (95 Octane)

Price increase of R1.71 per litre

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???Diesel (0.05% sulphur)

Price increase of R2.84 per litre

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???Diesel (0.005% sulphur)

Price increase of R2.76per litre

Source: CEF

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Durban port struggles to source ‘critical’ equipment spares

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Transnet Port Terminals (TPT) is battling to complete repairs to equipment needed in Durban port’s Container Terminal Pier 2 after struggling to source spare parts. TPT Durban Container Terminals manager Lulamile Mtetweni said on Monday that the current challenges with equipment were mainly due to the unavailability of critical spares that were needed as an interim measure while awaiting a new fleet for the terminal. However, he said TPT was now exploring leasing equipment from original equipment manufacturers (OEMs) – even if it’s second-hand equipment – to improve equipment availability. He said TPT was approaching the market to solicit bids from OEMs for the supply of spares across all its terminals over a seven-year period in an open tender due to close this month. The tender is expected to be awarded in October, and DCT Pier 2 is one of the beneficiaries.

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Bidders are expected to submit proposals stipulating demand and supply timelines for spares for the existing fleet across all the company’s 16 sea cargo terminals. “Our supply chain management team is busy with sourcing straddle carriers and ship-to-shore cranes for leasing between now and the next 12 months when DCT Pier 2 takes delivery of its new fleet,” said Mtetweni. He added that new acquisitions included four ship-to-shore cranes, 35 straddle carriers, and 63 hauliers. Last month Transnet concluded the selection of an equity partner, Philippines-based International Container Terminal Services Inc to develop and upgrade DCT Pier 2. The operator will be part of a 25-year joint venture with TPT, aimed at improving the logistics associated with servicing South Africa and stimulating exports and imports regionally.

Source: FTW

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SA lags behind while global logistics retools

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Global automotive supply lines are being re-engineered to help the auto industry meet increasingly stringent emission targets. Legislators no longer focus on the tailpipe, and now include the full production cycle, from mine to end of life of the component. This applies to both internal combustion (ICE) and electric-powered (EV) vehicles. With most global auto manufacturers planning to phase out ICEs by 2035, the focus is on the EV supply chain. The year 2035 is the target date for a ban on the sale of new ICE-powered cars in Europe, China, Britain, Singapore, California and a growing number of US states, India and Chile, among others. In Africa, Kenya, Morocco, Egypt, Rwanda and Ghana have a 2040 target, and are actively marketing themselves as EV production hubs. South Africa’s response has been stuck in the mud of bureaucratic inertia.

Source: FTW

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South Africa’s vehicle exports rise in August

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August exports of motor vehicles rose substantially compared to the equivalent month last year.?Exports were up by 10 405 vehicles, which is 33.5% higher than August 2022. Vehicle exports for the year to date are over 12.4% ahead of the same period last year. Sales for medium and heavy truck segments of the industry reflected a positive performance during the month - and at 702 units and 2 374 units, respectively, showed an increase of two units, or 0.3% in the case of medium commercial vehicles. Heavy truck and bus sales increased by 223 vehicles, reflecting a gain of 10.4% against the corresponding month last year.

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The August 2023 new passenger car market, at 28 951 units, registered a decline of 2 064 cars, or a loss of 6.7%, compared to the 31 015 new cars sold in August 2022. The car rental industry supported the new passenger car market during the month and accounted for 16.2% of sales in August 2023. Domestic sales of new light commercial vehicles, bakkies and mini buses, at 13 652 units during August 2023, recorded an increase of 363 units, or a gain of 2.7%, from the 13 289 light commercial vehicles sold during August 2022.? Source: National Association of Automobile Manufacturers of South Africa (Naamsa)/ The Automotive Business Council.

Source: FTW

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BUSA Summary

In the country's maritime economy, commercial ports handled a shockingly low average of?6 646 containers?per day. Port operations were characterised by poor weather conditions, frequent equipment breakdowns and shortages, and congestion. Operational performance took centre stage in Cape Town this week as import collections were seized for an entire day. At the same time, equipment availability in Durban proved to be a significant stumbling block to operations on the landside. The Durban and Richards Bay helicopters remain out of commission, while the floating crane in Durban was still unavailable for bookings this week. Crane QC1 at NCT received an estimated time of return of 07 September 2023, while the shore tensioner and the Mooring master were in operation at berths D100 and D101 for most of the week. Additionally, a massive change has recently been implemented for over-border rail containers, as declarations now need to be submitted to customs, leading to increased dwell times.

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The global economy is shifting towards a survival-of-the-fittest trade approach as major economies depart from post-World War II rules, favouring restrictive tactics. Despite warnings, the US maintain unilateral actions like illegal tariffs as the dysfunction of the WTO appellate body allows vetoing of rulings. The decline in filed trade disputes is observed as countries opt for unilateral measures. US and China's increased restrictive trade policies contribute to doubling such policies compared to the past decade. The proposed?↑10%?global tariff proposal could harm the US economy if President Trump gets elected for a second non-consecutive term. Efforts to restore dispute settlement face scepticism due to power struggles between the US and China, risking a?$4,4 trillion?global output reduction. Consequently, effective international trade governance is crucial.

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In the global maritime industry, freight rates were relatively stable as the 1 September rate GRIs balanced against the general trend. Nevertheless, the overall market sentiment remains poor, with global rate indices giving up all of their gains in August in a repeated pattern of early month rate gains followed by rate cuts as the month progresses. Net container capacity increases have already toppled?1,2 million TEUs?this year, with additional deliveries far from finished as liner supply increases in 2023 are hovering around?6%?of the global fleet. Other developments included Hapag-Lloyd being frozen out of the HMM purchase.

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PORTS

Summary of port operations

The following sections provide a more detailed picture of the operational performance of our commercial ports over the last seven days.

i. Weather and other delays

???????????????Import collections were seized for an entire day in Cape Town, causing significant disruptions.

???????????????Landside equipment availability in Durban continued to inhibit operational efficiency.

???????????????Adverse weather in our Eastern Cape ports resulted in operational delays.

???????????????Inclement weather delayed a vessel early in the week at Richards Bay.

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ii. Cape Town

On Wednesday, CTCT recorded three vessels at berth and four at anchor as adverse weather and below-par operational performance continued, with the Santa Isabel, for example, stuck at berth for six days. Stack occupancy for GP containers was recorded at 33%, reefers at 58%, and empties at 43%. In the latest 24-hour period to Thursday, the terminal handled 1 499 TEUs across the quay. 282 trucks were serviced on the landside, while 25 rail containers were on hand. Import collections at the Port of Cape Town were closed from 06:00 on Wednesday until 06:00 on Thursday due to higher-than-normal equipment breakdowns and a Women's Day celebration at the port. These celebrations were met with discontent from several industry participants as productivity levels at the port remain dismal, yet they find the time to engage in such activities. TPT advised that the SANTACO strike took place on the holiday (9 August), leading to the celebrations being moved to Wednesday.

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The preliminary damage assessments conducted on the shore tensioning unit, which was submerged last week, have been sent to the respective OEMs. However, assessments are not yet completed and are thus still ongoing to establish the full extent of the damages. No estimated time of return is available yet. Additionally, the technical team indicated that two additional shore tensioning units are anticipated to arrive at the port by the end of October to combat vessel ranging at the port effectively.

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iii. Durban

Pier 1 on Thursday recorded two vessels at berth, operated by five gangs, and no vessels at anchor. Stack occupancy was 40% for GP containers and 28% for reefers. During the same period, 716 imports were on hand, with 431 units having road stops and 33 unassigned. The terminal recorded 1 123 landside gate moves, with an undisclosed number of cancelled slots and 175 wasted. The truck turnaround time was recorded at ~80 minutes, with an average staging time of ~56 minutes – stretching to eight hours on Saturday evening (26 August), mainly due to the windbound terminal (see further analysis below on TTT and staging times). The terminal was also impacted by the late arrival of employees during the morning and afternoon shifts due to congestion on Bayhead Road. Additionally, berth 107 went out of commission on Thursday until around 18:00 on Friday due to scheduled dredging.

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Pier 2 had four vessels at berth and three at anchorage on Wednesday. In the 24 hours to Thursday, stack occupancy was 59% for GP containers and 43% for reefers, with 59% of reefer plug points utilised. The terminal operated with ten gangs while moving 2 713 TEUs across the quay. During the same period, there were 2 799 gate moves on the landside with a truck turnaround time of ~107 minutes and a staging time of ~141 minutes. Challenges surrounding straddle carrier availability persisted this week, with frequent breakdowns restricting adequate availability. On Thursday morning, the terminal had just over 50 straddles in operation. As a result, the issuance of truck appointments was frequently stopped throughout the week. Of the landside gate moves, 1 778 (64%) were for imports and 1 021 (36%) for exports. Additionally, 486 rail import containers were on hand, with 334 moved by rail on Friday. Of the import units on hand, 191 are destined for the container corridor and have a dwell time of 120 hours, while 295 units have over-border destinations and 32 days.

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For most of the week, the port operated waterside activities with a complement of five tugs while the port helicopter remained out of commission. Even though the helicopter is of Italian origin, the latest reports suggest that the spares required for the repairs "are sourced from one of the countries affected by the war". Additionally, the floating crane was still unavailable for bookings this week due to the crane driver not recovering fully after being hospitalised. At the start of the week, the driver indicated that he still felt unwell and was subsequently hospitalised again later in the week. However, TNPA advised that the two trainee drivers should complete their certification by mid-September and the end of September, respectively, which would hopefully ensure that the port does not find itself in a similar situation in future. The immediate contingency plan is for a certified crane driver from Cape Town to aid the situation in Durban until a trainee driver is certified or until the current certified driver returns to work from the hospital. Additionally, the impact of the floating crane not being in service is minimal for DCT as Point feels the immediate impact of handling breakbulk and abnormal cargo.

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iv. Richards Bay

On Thursday, Richards Bay recorded nine vessels at anchor: five destined for DBT, two for MPT, and two for RBCT. The port also recorded 13 vessels on berth, translating to six at DBT, five at MPT, two at RBCT, and none at the liquid bulk terminal. Two tugs and one pilot boat were in operation for marine resources in the 24 hours leading up to Friday. The port helicopter remains out of commission as the technical team awaits spares to execute the needed repairs. Industry fears that the technical team will end up in the same situation as Durban, facing extensive procurement delays.

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v. Eastern Cape ports

NCT on Wednesday recorded three vessels on berth and four vessels at outer anchorage. Marine resources of two tugs, a pilot boat, two pilots, and one berthing gang were in operation in the 24 hours leading up to Thursday. In the same period, stack occupancy was 38% for GP containers, 58% for reefers, and 72% for reefer ground slots. In that period, despite being windbound for five hours, 1 862 TEUs were processed at a GCH of ~15 and SWH of ~36. Additionally, 111 reefers were handled, while 528 trucks were serviced on the landside at a truck turnaround time of ~39 minutes. Additionally, Crane QC1 received an estimated time of return of 07 September 2023, as the technical team is still awaiting the last spares to finalise repairs on the crane. The terminal also operated with six gangs across the three operational berths, while the shore tensioner and the Moor Master operated at berths D100 and D101, respectively, for most of the week.

GCT on Tuesday recorded one vessel at outer anchorage and one at berth. Available waterside resources were two tugs, a pilot boat, two pilots, and one berthing gang in the 24 hours to Wednesday. In the same period, stack occupancy was 71% for GP containers, 80% for reefers, and 52% for reefer ground slots. On the waterside, 665 TEUs were handled across the quay. Additionally, 325 trucks were serviced on the landside at a truck turnaround time of ~22 minutes.

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On Monday, the Port of East London had two vessels on berth and none at anchor. However, minimal operations occurred at the port due to adverse weather conditions. On the waterside, no containers were moved across the quay, but 69 external trucks were serviced on the landside at a truck turnaround time of ~15 minutes. Stack occupancy on the container side was recorded at 51%. During the same period, at the Ro-Ro terminal, 487 units were received, leading to a stack occupancy figure of 64%. No bulk tons were handled on the waterside, while 2 RMTs, translating to 70 tons, were serviced on the landside.

Lastly, MSC announced on Tuesday that the Ingwe Service rotation will be amended effective from the MSC Adu ZA330A (ETA Durban 02/09). Ngqura will be removed from the rotation to improve the service's overall reliability and shorten the overall port stay in South Africa. All Ngqura and Cape Town import cargo will be discharged in Durban for further transhipment to Ngqura.

Source: BUSA

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Key Notes

???????????????An average of?~6 646 containers?was handled per day, with?~9 082 containers?projected for next week.

???????????????Rail cargo handled out of Durban amounted to?2 194?containers,?↓6%?compared to last week.

???????????????SARS merchandise trade (July): exports (↑4,6%, m/m), imports (↓7,6%); YTD surplus:?R16 billion.

???????????????Cross-border queue times were?↓1,4 hours?(w/w), with transit times?↑0,1 hours?(w/w); SA borders decreased by ~20 minutes, averaging?~9,9 hours?(↓3%); Other SADC borders averaged?~8,0 hours?(↑3%).

???????????????Global freight rates decreased by?↓1,6%?(or?$28) to?$1 740?per 40-ft container, as GRIs will likely end.

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Have a wonderful week