COVID-19, supply chain delays a stumbling block for South32

Rising COVID-19 cases and supply chain constraints continue to plague WA-based diversified miner South32.

The company on Monday said the problems were compounded by shipping issues.

“The COVID-19 pandemic continues to impact our operations and supply chains in different ways, across our global portfolio,” it said.

“We have seen an increase in case numbers and workforce restrictions in many of the jurisdictions in which we operate, impacting labour availability.

“Port congestion and tight global freight conditions continue to impact our supply chains, slowing the movement of inventory, most notably for our aluminium smelters in southern Africa.”

The news had sent shares in the company down just over 4 per cent by 11.20am to $3.92.

The Graham Kerr-led company said a build-up of aluminium inventories during the first six months of the financial year were expected to continue in the near term as it worked to establish alternative shipping solutions and points of export to minimise the impact.

Despite the setbacks, South32 increased alumina production 4 per cent in the quarter to 1.33 million tonnes compared to the first three months of the financial year — but down 4 per cent on the same period a year earlier.

Its Worsley Alumina operations in WA continued to operate above nameplate capacity and record production at Brazil Alumina was reported as it returned to normal rates following the prior quarter’s loading issues.

South32 said it expected to grow its total share of aluminium production by 24 per cent in the next few years through the proposed acquisition of an additional interest in the hydro-powered Mozal Aluminium smelter and the restart of the Brazil Aluminium smelter using 100 per cent renewable power.

“We achieved a number of strong production results across our portfolio and realised significantly higher commodity prices in the December 2021 half year, lifting operating margins across the group,“ Mr Kerr said.

“We delivered higher base metals production and our integrated aluminium supply chain benefitted from additional alumina volumes and record aluminium prices.”

But metallurgical coal output of 1.2 mt from its Illawarra operations was down 24 per cent quarter-on-quarter — and 15 per cent for the first half compared to a year earlier — with saleable production decreasing by 23 per cent in the half as it completed an extended longwall move at the Dendrobium mine.

South32 also warned the implementation of additional COVID-19 workforce restrictions in NSW could further impact labour availability across the second half of the year.

Australia manganese production guidance was cut by 9 per cent as COVID-19 and weather impacted production, preventing the re-build of stockpiles ahead of the wet season.