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Enhancing South Africa's Competitiveness Through Rail
 

Enhancing South Africa's Competitiveness Through Rail

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Presented by: Siyabonga Gama at the 2009 Railways and Harbours Conference in Cape Town.

Presented by: Siyabonga Gama at the 2009 Railways and Harbours Conference in Cape Town.

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    Enhancing South Africa's Competitiveness Through Rail Enhancing South Africa's Competitiveness Through Rail Presentation Transcript

    • Catalyzing South Africa’s Competitiveness and Growth Through Rail Siyabonga Gama CE, Transnet Freight Rail 5 March 2009
    • FOCUS OF MY REMARKS • Where is the growth that we are focusing on? • How can country logistics be improved and what impact does this have on growth? • Specifically what is Transnet doing to catalyze growth in South Africa? 2
    • TOTAL ENERGY COAL CONSUMPTION HAS ACCELERATED OVER THE PAST FIVE YEARS CAGR Consumption Import* Import* Total Domestic Historical global energy coal demand Mt Key drivers Unexpected demand Slow growth • Chinese domestic acceleration demand has been the main driver of total demand growth with a CAGR of 5% p.a. 7.1% since 1990. In 2006 it 4 799 4 474 contributed 46% to 4 268 684 4 053 1.0% global consumption 660 3 709 598 574 3 409 3 277 3 236 532 3 111 • Asian demand 2 923 479 466 433 310 318 (excluding China) grow at 6% p.a. 4 115 3 814 3 670 since 1990 and was 3 479 3 177 2 930 2 801 2 803 2 811 2 605 the main contributor to seaborne demand growth 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 3.5% 7.4% 3 * Includes both seaborne and overland coal trade
    • WHILE RISKS EXIST ON THE DEMAND AND SUPPLY FRONTS, THE FUNDAMENTAL PICTURE IS BROADLY ONE OF GROWTH Energy coal export supply and demand (Mt)* Pre-crisis Demand- CAGR 3.0% Soft Landing Demand**- CAGR 2.9% Crash & Burn Demand**- CAGR 2.6% • Demand side risks Post crisis driven by GDP growth supply range** scenarios and timing/ delays of power plant completion • Supply could be more Base negatively influenced supply (around 50Mt), due to coal project delays • Overall, continued growth in export energy coal 2007 08 09 10 11 12 13 14 2015 * Normalised to 6000 kcal/kg 4
    • TFR PLANS TO GROW COAL VOLUMES TO ESKOM BY SIX TIMES OVER THE NEXT 8 YEARS Mtpa Growth drive by - Majuba - Grootvlei - Hendrina - Camden - Kusile - Duvha 25.7 6x 5.1* 2008 2015 * Current rail volume 5 Source: Eskom long-term coal strategy
    • HISTORICALLY CONTAINER VOLUMES HAVE GROWN VOLUMES HAVE GROWN BY A MULTIPLE OF 2-2.5 TIMES GDP 000 TEU 4 500 4 230 +10% 3 934 4 000 3 711 3 415 3 500 3 014 3 000 2 632 2 413 2 500 Import/Export 2 000 1 500 1 000 500 Transshipment 0 2003 04 05 06 07 08 09 GDP 3.2 3.0 4.6 4.4 4.5 4.4 1.2 (f) growth % 6
    • COUNTRIES CAN PURSUE TWO LEVERS TO CREATE VALUE FROM TRANSPORTATION AND LOGISTICS • Enhance basic transport facilities (ports, airports, railroad) Build • Grow transport services (air, sea, infrastructure warehousing, transshipments) • Develop/attract logistics service providers Creating Transnet value from strategically transport important- acts and logistics on both levers • Improve efficiency of industry supply Improving chains supply chain • Increase competitiveness of industries competitiveness that are highly dependent on logistics through logistics • Boost overall economic growth through productivity gains 7
    • THE AIM OF IMPROVING SUPPLY CHAINS IS TO REDUCE TWO TYPES OF LOGISTICS COSTS: DIRECT AND INDIRECT % logistics costs as part of revenue EUROPE EXAMPLE Direct costs Indirect costs Traditionally Known, but not properly Known, but not Neither known nor measured measured considered measured costs logistics costs 14-24 4-8 3-5 1-2 2-3 4-6 Transportation, Inventory Administrative Obsolescence/ Lost margin on Total supply warehousing, carrying costs and IT markdowns missed sales chain costs and handling (stock-out) 8
    • RAIL IS THE MOST CAPITAL INTENSIVE PART OF THE EXPORT COAL SUPPLY CHAIN Required capital investment for 91 Mt p.a. Rbn >40 12* TFR RBCT Mines * Estimate 9
    • CUSTOMER COLLABORATION HAS LED TO A STEP UP IN COAL LINE PERFORMANCE TEMPO Wagons per week 2,100 • We made up for the underperformance within 12 weeks- we have delivered over 25,000 wagons over contracted volumes in the last 12 weeks • Coal production and logistics have been in sync in the past weeks- however coal production is at risk of falling behind • We are ready to produce 1.5mt per week (equal to over 70mtpa) by June this year- up from 1.4mt per week now- to support our coal customers in securing contracts -300 March 26-Nov 16 Nov 17- March 1 2008 2009 under-delivery over-delivery 10
    • TIGHTLY MANAGING THE END-TO END SUPPLY CHAIN IS KEY FOR GROWING SOUTH AFRICAN COAL EXPORTS Covered by rail freight 1 2 3 4 5 Transport in Mining (Un-) loading (Un-) loading country of Loading at mine Shipping the coal at port at port origin (+TNPA) Selected companies 6 7 8 9 10 Gene- Transport in rating Handling at (Un-) loading (Un-) loading Feeding at destination port* at port at customer customer electri- geography city Selected companies 11 * Screening, washing, blending and storage of coals
    • NATCOR CONTAINER VOLUMES HAVE GROWN DESPITE THE WEAKENING ECONOMIC ENVIRONMENT TEUs Natcor- Total Superhighway 274.249 157.352 +10% 250.382 +55% Over 25,000 truck loads 101.456 taken off the road Apr 07- Feb Apr 08- Feb Apr 07- Feb Apr 08- Feb 08 09 08 09 12
    • RAIL PUNCHES WELL BELOW ITS WEIGHT BASED ON TOTAL SUPPLY CHAIN COSTS- BIG OPPORTUNITY FOR TRANSNET Current market share Ideal intermodal split by corridor based on supply chain cost analysis Assumptions / Methodology Percentage share •  Total supply chain cost per TEU is calculated for each container commodity (makes up 75-80% of total container volumes) 22 •  Long haul container volumes for each commodity are then allocated Road 45 on lowest supply chain cost mode for each corridor •  Total volumes per mode are calculated using the weighting of container commodities share of total volumes •  Assume that 2003/4 container volume breakdown by commodity Rail would be constant •  Bulk commodities were excluded 15% even if they are sometimes 5% containerised, as this is a temporary situation of container repositioning Durban Cape Town 13 Source: Transnet tariff book ; Drewry report ; LOGOS model ; Hub Team analysis
    • THE CORRIDOR CONCEPT HAS DELIVERED A BIG UPLIFT IN IRON ORE TEMPO OVER THE LAST YEARS Mt delivered per week 880,000 • Iron ore capacity has been improved by adding assets and improving turnaround 1.7x time 525,000 • Iron ore operating system has been upgraded- our 342 wagon iron-ore trains are now the longest operational trains in the world • Provided customer demand holds up, we plan to achieve a tempo of close to one million tons per week in the next financial year 2005 2008 14
    • HOW TO ENGAGE US? • Commercial approach- not a utility • Sustainability- we are serious about this • Recognize broad mandate 15
    • CUSTOMER COLLABORATION HAS LED TO A STEP UP IN COAL LINE PERFORMANCE TEMPO MAR 26 – 23 FEB 2009 Mt Delivered tonnes Customer and RBCT cancellations Normalisation for weeks of limited service** Minimum contract level till 26 March 09 Actual delivered capacity over last 12 weeks 1,55 1,54 1,51 1,47 1,47 1,46 1,45 1,44 1,44 0,09 0,12 1,43 0,10 0,03 1,39 0,04 1.400 0,03 0,09 0,06 0,09 1,32 1,24 0,15 1,20 0,06 0,20 1.235 0,03 0,03 0,15 0,40 0,83 0,06 1,45 1,44 1,42 1,41 1,39 1,38 1,34 1,33 1,29 1,17 1,23 1,21 1,17 1,01 0,77 23-Nov 30-Nov 7-Dec 14-Dec 21-Dec 28-Dec 4-Jan 11-Jan 18-Jan 25-Jan 2-Feb 9-Feb 16-Feb 23-Feb Mar-26 – Nov-16 ** Normalised for days that the service was not running (2 days in Xmas week and 1 day in New Years week) * Net TFR cancellations after additional trains serviced, calculated by scheduled volume minus customer cancellations minus actual railed 16 Source: RBCT YTD actuals and cancellations; TFR YTD actuals