Kumba Iron Ore CEO Mpumi Zikalala says their forecasts for 2025 suggest iron ore prices will continue to face downward pressure, driven primarily by weak steel demand from China’s slow economic recovery, the likelihood of steel production cuts globally and increasing supply from major producers.
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Kumba Iron Ore ended its year to December 31 with almost 20% less employees following a significant restructuring of its business and job losses that were forced by the continuing poor logistics performance by Transnet, and low iron ore prices.
The mining group’s integrated annual report released Friday said while there had been no forced retrenchments from the restructuring, the group did facilitate the creation of more than 3 000 non-mining jobs across various sectors, including agriculture, hospitality, manufacturing and tourism.
The groups’ total number of employees by the end of the year stood at 14 766, compared with 18 334 employees at the end of 2023, a difference of 3 568 - the 2023 figure was restated to include non-mining contractors of 3 686 (2023:6722). There were 17 recordable injuries in the year.
The workforce potentially faces health issues - the report said about 35% of the employees and contractors have chronic medical conditions, while 43% were classified as obese.
Despite the challenges, Kumba saw a resilient performance in 2024 and it paid R12.5 billion to its shareholders in dividends compared with R15.1bn in 2023. For the full year, the cash position of R14.7bn had increased by 11%.
“Continued poor logistics performance by Transnet, including derailments and logistics infrastructure and equipment failures and lower iron ore prices, led to reconfiguration of the business and job losses,” the group said,
Chairman Terence Goodlace said Transnet had operated at around 80% of its contractual volumes for Kumba last year, “its worst level yet, which had a significant knock-on effect on our production and sales volumes.”
“While we are encouraged by some recent regulatory developments to drive rail reform, significant work lies ahead before Transnet is back to full capacity,” he said,
Among the additional competitive disadvantages the group has to deal with are higher higher rail costs from mine to port, compared to global peers, and also due to the distance to the Chinese and Japan/Korea/Taiwan market.
Goodlace said that among regulatory progress made in 2024 to restore Transnet’s viability, was work to develop a concessionaire model, under which private sector parties would have operational and maintenance responsibilities for the OEC (ore export channel) from the Northern Cape to Saldanha Bay, for a defined period, once approved by government
Transnet published its Network Statement in 2024, which represented an important step forward by facilitating third-party access, and Kumba was engaging with Transnet through its involvement in the Ore User’s Forum and the National Logistics Crisis Committee, he said.
“Our financial performance for the year reflects our decision to reconfigure our business to a lower production profile, as well as the impact of the lower iron ore prices, resulting in our adjusted earnings before interest, taxes depreciation and amortisation (EBITDA) decreasing 39% to R28.1bn,” said Goodlace.
“We successfully concluded our organisational redesign in the third quarter, which pleasingly resulted in zero forced retrenchments,” said CEO Mpumi Zikalala.
“Looking to 2025, forecasts suggest iron ore prices will continue to face downward pressure, driven primarily by weak steel demand from China’s slow economic recovery, the likelihood of steel production cuts globally and increasing supply from major producers,” she said.
She said the anticipated increase in supply from new mining projects, such as Simandou in Guinea, was expected to exert further pressure on prices, without significant stimulus measures aimed at revitalising the Chinese economy.
“Despite these challenges, I am excited about the progress we are making and about the prospects that lie ahead,” she said.
In one of the group’s most significant recent capital investment decisions, the board in 2024 approved a proposal to recommence construction of a R11.2bn UHDMS processing technology at Sishen, a project expected to complete in 2029.
It entails converting the processing plant at Sishen to enable Kumba to treble the proportion of premium iron ore production -. premium iron ore is increasingly valued by customers as it reduces carbon emissions from the steelmaking process.
The group’s Social, Ethics and Transformation Committee was, through 2024, particularly engaged in monitoring the group reconfiguration plan, reviewing the measures taken to support the 688 permanent employees directly affected by the restructuring and tracking the progress of projects (on job support, business development, education and skills development) implemented as part of a social mitigation response plan, the report said.
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