South Africa’s state-owned logistics firm Transnet has declared force majeure and is seeking to terminate long-term coal transportation agreements, thermal coal producer and exporter Thungela Resources TGAJ.J said on Thursday.
Large-scale theft of copper cables, insufficient maintenance, and a lack of locomotives have crippled Transnet’s freight rail network used by coal and iron ore miners to transport their minerals to port.
“Transnet believes that these circumstances will continue to detract from its ability to perform for at least the next six months and that accordingly Transnet is under force majeure,” Thungela said in a statement.
Triggering a force majeure clause in contracts allows certain terms of an otherwise legally binding agreement to be ignored because of unavoidable circumstances.
Transnet did not immediately reply to a request for comment.
Thungela said Transnet “expressed a desire” to terminate its long-term transportation agreements with coal exporters.
The coal exporters are engaging with Transnet to “clarify the contractual position” and ensure the stability of coal deliveries to take advantage of strong demand for South African coal, Thungela said.
Coal producer Exxaro Resources last week said it had received “numerous” requests from European countries wanting to sign supply contracts, after the European Union proposed sanctions on Russian coal.
Both Exxaro and Thungela have said Transnet’s issues constrain their ability to ramp up coal production to meet the new demand.