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Civil unrest hits South African mineral supply chains

Highlights

Bulk commodity transport and export disrupted

PGM, chrome producers relatively unaffected

Several force majeure notices issued

Port, rail and road transport operations in South Africa have been disrupted by ongoing civil unrest and violence, with several notices of force majeure issued, impacting the transportation of mined raw materials.

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The unrest followed the jailing of the country's former president Jacob Zuma, and the subsequent dismissal of his bid by the country's High Court on July 9 to have his arrest overturned. However, it has since escalated into mass looting, violence and acts of destruction, mainly in the KwaZulu-Natal and Gauteng provinces.

The Department of Mineral Resources and Energy (DMRE) said July 15 in a statement that it continues to monitor the safety and security of the energy and mining sectors and is in discussions with all energy and mining sector players amid the ongoing unrest.

Notices of force majeure

Disruptions of supply routes into and out of KwaZulu-Natal due to the civil unrest resulted in Southern Africa's largest oil refinery, the 165,000 bbl/d South African Petroleum Refineries, owned in partnership by Shell Refining SA and BP Southern Africa, declaring force majeure on July 13. The refinery in Durban said it was unable to sustain refinery operations, which could impact national petroleum product supply.

South Africa's state-owned rail, port and pipeline company Transnet said in a July 14 statement that a force majeure had been declared on the 688-km-long Natcor bulk freight rail network, which links Gauteng to the Durban and Richards Bay ports, due to the unrest.

Transnet further said that service levels at the two ports have been "negatively affected" as the entire supply chain, including the roads leading in and out of the ports, were impacted by the ongoing unrest.

On July 14, ferrous metals miner and processor Assmang and ArcelorMittal South Africa, the country's largest primary steel producer, both declared force majeure on their customer contracts.

PGM, chrome producers largely unaffected

Platinum group metals (PGMs) and chrome co-producer Tharisa – which owns a 74% interest in the Tharisa mine, located on the western limb of South Africa's Bushveld Igneous Complex – said July 14 that it remained unaffected by the unrest .

Iron ore, manganese and chrome miner Assore's executive for human resources and public affairs, Bongani Phakathi, told S&P Global Platts July 15 that there had been no material effect on the company's Dwarsrivier chrome mining operation in the country's Northern Cape province, noting that the mine was still in operation. Neither the logistic channel to Maputo, nor the port of Maputo, through which the majority of Dwarsrivier's exports pass, have been impacted, the company said in an email.

However, "Where applicable, force majeure has been declared on customers and service providers by Assore's marketing, sales and shipping arm, Ore and Metal Company, on behalf of Dwarsrivier," Phakathi said.

Impala Platinum (Implats), the world's third-largest platinum producer, said July 14 that it had not been impacted to date.

Implats' group executive for corporate affairs Johan Theron told Platts that the port infrastructure in Durban and the N3 road corridor linking Durban to South Africa's inland provinces are however critical for fuel and chemical supplies to reach the entire South African mining industry.

At one of the world's largest platinum producers, Anglo American Platinum, spokesperson Jana Marais told Platts July 15 that its operations had not been impacted at that stage, and that the company "continues to monitor developments carefully".

South African vanadium producer Bushveld Minerals' head of investor relations Chika Edeh told S&P Global Platts in an email that "The unrest has not had any impact on our production and no material impact on our supply chain."

Bulk commodity transport, logistics most affected

Speaking to Platts, Aleix Montana, Africa analyst at risk intelligence company Verisk Maplecroft, said that miners will be impacted by disruptions to transport infrastructure.

"The export of bulk commodities from Gauteng are experiencing delays due to disruption to the road and rail network linking the region to [the port of] Richards Bay," Montana said.

Montana said that apart from economic losses resulting from looting and damage to private property, investors' perception of the country will likely deteriorate due to the intensity of ongoing events, causing a long-lasting impact to the economy.

Indigo Ellis, associate director at strategic risk advisory firm Africa Matters, said July 14 that heavy disruption to bulk commodity transport and export, particularly from the port of Richards Bay, would be expected should unrest continue, but that this is likely to be short-lived.

"The insurrection lays bare a lack of capacity in government structures, and an inability of the government to rectify the root inequalities driving the unrest," said Ellis.

Ellis further said that mining companies should continue to use the Minerals Council South Africa, a mining industry organization, to exert pressure on the cabinet, compelling DMRE minister Gwede Mantashe - particularly in his role as national chairperson of the country's ruling party, the African National Congress - to respond more appropriately to the situation.