Riots, looting trigger force majeure at South African ports

Widespread violence and looting have triggered declarations of force majeure at ports in South Africa’s KwaZulu-Natal, threatening to stall exports of chrome and manganese.

Transnet, the South African national logistics service, declared force majeure on Monday July 12 for operations at the ports of Durban and Richards Bay.

The violence “has now reached proportions beyond the control of the local law enforcement and security services,” Transnet said.

The violence was sparked by the jailing of former South African president Jacob Zuma. Zuma handed himself in to police on July 8, to begin serving a 15-month sentence issued in absentia after his refusal to appear in front of a corruption inquiry.

So far, the violence has been concentrated in Zuma’s home province of KwaZula-Natal. The province, in eastern South Africa, is the location of two major ports, Richard’s Bay and Durban, which are key export routes for chrome and manganese ore.

Bulk Connections, a bulk handling facility in Durban, on July 13 warned that all operations had been suspended.

“Unfortunately, the civil unrest and rioting continued throughout the night and is still continuing in many areas this morning. There is a military presence in the port and around the Cutler complex area,” Bulk Connections told customers.

Markets were starting to size up the potential effect on ore exports.

“We have warned our customers of potential issues in response to this – it is a huge mess for South Africa,” a ferro-chrome producer said. “This will lead to a shortage of containers because shippers will skip South Africa.”

There could be price rises in the short term in the ferro-chrome market, which is already tight due to a shortage of material, according to market participants.

Fastmarkets’ latest price assessment for ferro-chrome 50% Cr import, cif main Chinese ports, was $1.12 per lb contained Cr on July 13, an increase of 3.7%.

“We are counting on material from South Africa and Zimbabwe – these exports are critical,” a ferro-chrome consumer said. “But shipping owners won’t bring containers there now and bulk carriers are not there – everything will head elsewhere. Prices will rise as a result.”

As a consequence of the situation, chrome ore and alloy producers in South Africa are looking for options, including exporting via Maputo in Mozambique when this is possible.

“We are busy assessing the situation to see if we should also declare force majeure to our customers and vessel owners where we foresee major delays,” a chrome producer said.

“The loading procedure for our July shipment has had to be paused because of inland logistics disruptions and a lack of workers at ports,” a chrome ore seller said.

With uncertainty about how long the unrest would last, chrome ore miners told Fastmarkets they have stopped offering to buyers in the market, and whether this has any effect on prices will rely on its duration.

“The effects will depend on how long [the situation] lasts but, seeing as they have started to burn trucks and intimidate working people, eventually it might [have repercussions for prices in the market],” a second chrome ore seller said.

Buyers in China, the world’s largest importing country of chrome ore, have expressed some concerns over South Africa’s shipping issues, but there has been little price reaction so far.

Prices for UG2 chrome ore at China’s Tianjin port stayed at 29.50-30,00 ($4.55-4.63) yuan per dry metric tonne unit (dmtu) in the week ended July 13, unchanged from the previous week, according to market participants.

“There has been no reaction from buyers regarding the unrest and riots in South Africa, while suppliers are more concerned that ore demand might weaken after Inner Mongolia tightened its power restrictions recently,” a chrome ore trader said.

Meanwhile, the ample chrome ore stocks at port can cover buyers’ demands in the near-term, market participants told Fastmarkets.

Fastmarkets assessed chrome ore inventories at the main ports of Tianjin, Qinzhou, Lianyungang and Shanghai at 3.51-3.69 million tonnes on July 12, up by 2.6% from 3.42-3.60 million tonnes the previous week.

And similar responses were seen from participants in the manganese market, where portside markets were stable.

Fastmarkets calculated the manganese ore port index, base 37% Mn, range 35-39%, fot Tianjin, China, at 34.30 yuan per dmtu on July 9, up from 34.10 yuan per dmtu the previous week.

Fastmarkets’ calculation of the manganese ore index, 37% Mn, cif Tianjin, edged down to $4.68 per dmtu on July 9, from $4.70 per dmtu on July 2.

Prices for semi-carbonate have been under sustained pressure from heavy stocks at ports since late last year.

Fastmarkets’ assessment of manganese ore inventories at the main Chinese ports of Tianjin and Qinzhou rose by 1.92% to 5.46-5.67 million tonnes on July 12, from 5.32-5.60 million tonnes the previous week.

“I don’t see [any cause for] panic yet in terms of supply,” a South African manganese exporter told Fastmarkets, but he added that “the market can swing from oversupply to undersupply in less than a month” without South African exports.

And he noted that the effect on South African logistics, which were already stretched by high freight costs and a national Covid-19 lockdown, could extend beyond KwaZulu-Natal.

“There’s going to be knock-on effect on other ports,” he said. “We had a vessel scheduled to arrive at another loading port in July, but which will not, because it couldn’t unload in Durban.”

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