Kumba Iron Ore has reported a commendable increase in production and sales volumes in the third quarter of 2024, even as the company grapples with logistics challenges stemming from weather disruptions at Saldanha Bay and an impending maintenance shutdown by Transnet.
The mining giant’s resilience in the face of such hurdles is likely to play a pivotal role in attaining its annual sales targets.
In the quarter to the end of September, Kumba Iron Ore increased production by 3% to 9.4 million tons compared to the previous quarter to June, with the company on course to to deliver on its 2024 full year guidance of between 35m and 37m tons.
The company raised sales volumes for the third quarter to September by 2% to 9m tons relative to the comparative same period in 2023.
However, when compared to the second quarter of the current year, production in the period under review decreased by 6%.
It said the year-on-year decrease in sales volumes was due to “ship loading (which) was impacted by adverse weather conditions in July 2024 at the [Port of] Saldanha Bay”.
“Given this, sales are expected to end the year closer to the lower end of our full year 2024 sales guidance of 36m tons to 38m tons subject to Transnet’s logistics performance which will include the annual maintenance shutdown in October 2024,” explained Kumba CEO, Mpumi Zikalala.
The company said its cost optimisation programme was progressing well as it targets a C1 unit cost of $38 (approximately R2 400) per ton for the full year to December 2024.
Shares in Kumba Iron Ore appreciated by 3.14% to R342.87 per share in afternoon trade on the JSE.
Zikalala added that the global iron ore market was battling “low steel demand, robust iron ore supply and elevated inventories at ports” in China.
This had “continued to place pressure on the iron ore” market although the market had rallied in the last week of September 2024 on the back of economic stimulus measures announced by the Chinese government and calls for counter-cyclical fiscal policies to stabilise the Chinese property market.
This had resulted in a year-to-date average benchmark free-on-board iron ore price of $90 per wet metric tons.
“Against this context, Kumba achieved an average realised free on board export price of $94 per wet metric tons, $4 per wet metric tons above the average benchmark price, reflecting the premium quality of Kumba’s iron ore products,” said Zikalala.
Kumba Iron Ore sees steel production shifting in the long term to direct reduced iron steelmaking, which has significantly lower emissions compared to the traditional blast furnace route.
This would propel demand for direct charge materials such as Kumba’s high-quality iron ore lump.
Finished stock as at the end of the period under review stood at 8.6m tons compared to 9m tons a year ago. Of this, 7.5m tons in stock was on-mine while 1.1m tons was at port.
BUSINESS REPORT