Thungela Resources Ltd warned on Thursday that a prolonged strike at the South African state-owned logistics group may force the company to curtail production.

This comes after the United National Transport Union embarked on a strike action from Thursday having rejected Transnet SOC Ltd’s the wage offer.

The industrial action is likely to cripple rail and port services.

Transnet has committed to move 60 million tonnes of coal by for its financial year ending March 2023. It hauled about 53.3 million tonnes on its railway line for the year to June 30, compared to over 70 million tonnes at the same time in 2020 and earlier years.

The South Africa-based thermal coal exporter said its operations were able to run without rail for a further seven days without experiencing a significant impact on production.

In the event of a protracted strike extending to two weeks, it warned that it would be forced to further curtail production, with the potential resultant impact being a reduction of up to 300,000 tonnes of export saleable production.

Industrial action will interrupt railing from the company’s operations to the Richards Bay Coal Terminal, a privately held port that operates independently of Transnet and should be able to continue to load

vessels.

‘Given RBCT’s ability to load vessels and Thungela’s ability to draw down on healthy stock levels at port, we currently expect the impact on sales for Q4 2022 to be limited,’ Thungela said.

The strike adds to a long list of constraints preventing coal producers like Thungela to transport coal by rail at full capacity.

Transnet is battling with ongoing legal matters related to the irregular locomotive acquisition, maintenance contracts, as well as the vandalism of the coal line.

‘Rail constraints over recent months have resulted in relatively high stockpile levels on our operations,’ Thungela said on Thursday.

Thungela, other coal exporters and Transnet are working to deploy additional security measures on the rail coal line, including intensified helicopter surveillance, heightened focus on depots and an increase in the number of reaction teams on the ground.

Shares in Thungela slumped 3.4% to R 313.96 on Thursday afternoon in Johannesburg, while they lost 3.5% to 1,571.00 pence in London.

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