Anglo American Plc’s South African iron ore unit said stockpiles of premium grade iron ore continue to build up at its mining operations as rail and port bottlenecks hamper shipments of the steelmaking ingredient

South Africa’s state-owned rail operator Transnet SOC Ltd. is plagued by lack of capacity, exacerbated by maintenance backlogs and vandalism. The bottlenecks, also hitting other shippers such as coal producers, have resulted in Kumba Iron Ore Ltd. building up stockpiles of its high-grade iron ore including at its giant Sishen open-pit operation in South Africa’s Northern Cape province

Iron ore stockpiles increased to 7.8 million tons by Dec. 31 from 6.1 million tons a year earlier due to rail constraints, Kumba said in a statement on Tuesday. Transnet’s poor logistics performance, including a worker strike during 2022, curbed the volume of ore railed to port by 9% to 35.9 million tons, the miner said

“Rail capacity was predominantly impacted by derailments and a weather-related event in the first quarter, resulting in increased speed restrictions, while low availability of train wagon sets led to increased turnaround times,” Mpumi Zikalala, the chief executive officer of Kumba, said. “Industrial strike action, equipment breakdown and locust outbreaks further contributed to rail performance reducing to 80.3% of contracted tonnage.”

Kumba’s misfortune comes at a time when demand for its premium-grade iron ore has remained strong. It realized an average price of $113 per ton, 13% above the benchmark price as demand in Europe and China remained buoyant

The Anglo unit said it will reset its production outlook over the next three years “to reflect lower expected Transnet rail performance, given the challenges faced in 2022.” Output this year will be maintained at between 35 million tons to 37 million tons as it clears stockpiles. Production could increase by 5% to 6% each year in 2024 and 2025 as rail performance improves