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MARKET conditions for iron ore deteriorated in the third quarter as higher coking coal prices hurt steel mill profitability while freight rates to China hit a five-year high, said Kumba Iron Ore.
The Anglo American-owned miner said in its production update for the period that rail volumes from its Northern Cape mines to Saldanha Bay Port fell 8%, largely owing to a derailment affecting 400,000 tons of material. Railed iron ore came in at 9.4 million tons (Mt) for the three months, down from 10.2Mt in the corresponding period last year.
Despite these pressures, Kumba realised an average price of $86/t for the nine months, a 9% premium to the average benchmark of $79/t, though down from $94/t a year earlier, when the benchmark averaged $84/t. Kumba sells a niche lump iron ore which fetches a market premium.
"Weaker Chinese steel production, compressed mill margins and strong seaborne supply weighed on prices,” said Mpumi Zikalala, CEO of Kumba, on Tuesday.
Seaborne iron ore supply rose an estimated 1%. Higher shipments from Australia and Guinea – where the Simandou mine is being ramped up following commissioning – were largely offset by lower output from Brazil and Ukraine.
A perennial question mark over Kumba’s performance is the reliability of its freight partner, the government-owned Transnet Freight Rail (TFR). TFR is working through a rehabilitation of its network. While progress is being made – 22km of rail line was replaced during the latest 10-day maintenance shutdown, in October – the derailment is evidence of work still to be done.
Kumba said 33% of Transnet’s planned 517km rail replacement programme had been completed, resulting in the lifting of 40% of the speed restrictions on the export channel. At Saldanha Bay Port, refurbishment work on four stacker reclaimers and two ship loaders was completed, while commissioning of Tippler 3 is underway, said Kumba.
In terms of third-quarter production, Kumba produced 19% less iron ore (7.5Mt vs 9.2Mt in 2025). This was in line with previously announced plans to throttle back as the company tied in its R11.2bn UHDMS processing project at Sishen. The project is about 60% complete and is aimed at increasing the proportion of premium-grade ore, reducing waste mining and extending Sishen’s mine life. The main tie-in is due for completion before the end of 2026, with final conversion of the modules in 2028.
Across the group, production guidance for the year remains unchanged at 31Mt to 33Mt. However, forecast waste mining – an indicator of access to economic ore – was trimmed to 175Mt to 190Mt from 180Mt to 195Mt. This was largely because Kolomela continued to feel the effects of heavy rain and flooding in the second quarter, and its guidance was cut to 40Mt to 45Mt from 45Mt to 50Mt.
In terms of unit costs, Kumba said it was sticking to guidance, although it warned of potential consequences of the ongoing conflict in the Middle East, which sent oil prices soaring.
Freight rates on the Saldanha to Qingdao route increased to $32/t in September, a five-year high, owing to tighter vessel availability and higher bunker fuel rates. This took the year-to-date average freight rate to $23/t.
These pressures aside, Kumba increased sales in the period by 3% to 10Mt as it drew down stocks at Saldanha Bay Port. All in all, total stocks (mine and port) were depleted, ending the period at 4.8Mt from 7Mt in the previous quarter.