The
road freight industry has experienced ten months of contract declines, on a
three-month moving average. It is not as bad as the situation in 2008/09, but
it’s extremely bad for Transnet.
Addressing members of
the road freight industry at the Road Freight Association’s annual convention
this week, economist Mike Schussler explained to what extent the commodity
crunch is hurting the transport sector.
He said: “Twenty-foot
container transport volumes are around 8% down on a three-month moving average
as of April. Imports were really coming down for about six months. There were
double-digit declines in the imports side while exports were one or two percent
up. The last month or two the export side is down 4.6% on its three-month
moving average. Some of our exports, despite the weak rand, are not doing so
well. The situation is worse than the big recession of 2008 if you look at what
is coming into the ports.
“Real bulk
commodities through the ports are 5.8% down for the three months to April
compared to the same period last year. The figure in March was the worst that
we’ve ever had. While coal in April held up, (around 3% on a year ago), iron
ore has been totally decimated; three million tonnes in a month went missing.
Iron ore has been cut by 30% and is projected to decline further. That and coal
are decimating rail transport and the ports.
“Transnet is not
going to make the money they thought they would. They have already announced
their strategy to move into FMCG. Why do you think you’re getting a permit system?
It’s because they are under pressure, they are not going to make a profit. Bulk
freight is the mainstay of rail transport; there are two profitable lines:
the iron ore line and the coal line.
“They did not expect
this. If you look at their strategic plan, they are about 40 million tonnes
behind schedule. That is about 12% of what they thought they were going to
have. And it’s disappearing. They thought that in two years’ time that they’d
be doing 300 million tonnes. Now it looks more likely that they’re going to
move less than 200 million tonnes.
“Truck sales were up
in April, which is quite surprising. However, a lot of guys entering the
industry now are going to have a very tough time paying those trucks off as the
volumes are not there. We’ve been lucky with the petrol price, which has spiked
a bit. It is starting to increase as the weaker rand plays its role. Your costs
are going to come under pressure.
“The next five years
are going to be hard. You’re going to have to think differently, you’re going
to have to chase different types of customers, you’re going to have to look at
your costs, you’re going to have to look at the type of customers you can get,
you’re going to have to get proper customers, do a cost analysis, do it
properly, get it done, keep on increasing to keep yourself sustainable in a
high inflation environment. If you don’t do that, you go under. Auctioneers are
sitting up and are waiting for you. They love selling trucks. We are in the
perfect storm.”
Article first appeared in Transport World Africa: