ASHLEY NYIKO MABASA | Russia’s diesel ban exposes costs for mining transport

The global energy landscape is being reshaped by a dual-front geopolitical crisis that threatens the structural stability of industrial supply chains.

The intersection of Russia’s short-term ban on diesel exports, a defensive measure after Ukrainian drone strikes on its refining infrastructure, and escalating tensions between the US and Iran in the Strait of Hormuz have created a perfect storm for middle distillates.

For the global mining sector, which remains heavily tethered to diesel-powered extraction and logistics, this is more than a transitory price shock, it is a profound challenge to established capital allocation strategies.

The structural reality of the diesel market is increasingly precarious. Russia, which accounts for about 11% of global diesel supplies, has been forced to prioritise domestic supply as Ukrainian kinetic operations have reportedly disrupted about 25% of its 7-million barrel-a-day refining capacity.

This supply-side contraction coincides with acute maritime risks in the Middle East. With 13% of global oil flows potentially subject to disruption, benchmark European diesel margins have surged to records near $60 a barrel. Even as crude prices oscillate around the $70 mark, diesel remains decoupled, trading significantly higher at roughly $135 a barrel, reflecting a chronic shortage of refining throughput and thin global inventories.

This volatility is disproportionately penalising energy-intensive sectors, with the mining industry at the vanguard of the impact.

Data from the Minerals Council South Africa illustrates the severity of this exposure: input cost inflation for quarrying and aggregates has hit 6.3% year on year, primarily driven by diesel-powered operations. For bulk commodity producers of coal, chrome, and manganese, the reliance on road-based transport creates an acute vulnerability.

In South Africa, where about 30% of coal is moved by truck, the monthly fuel bill for the sector is projected to nearly double from a baseline of R2.9bn to R4bn. This is not merely a margin squeeze, it is a systemic failure to de-risk the supply chain against predictable energy shocks.

The current crisis demands a fundamental shift in how mining executives approach capital discipline. Historically, miners have treated fuel as a variable cost input to be managed through hedging and pass-through mechanisms.

However, the persistence of the “refining gap” suggests short-term fixes are no longer sufficient. Mining houses must rethink capital allocation towards structural productivity gains. This involves aggressive investment in logistics diversification, reducing reliance on road-based transport in favour of more efficient rail or automated systems, and accelerating the transition to electrification and renewable-integrated fleets.

In a high-volatility environment, value creation will be defined by energy security. Companies that continue to allocate capital to expansion without first securing the energy and logistical infrastructure to support it will find their productivity gains eroded by inflationary pressures.

The diesel crunch in Africa, Latin America and Southeast Asia will be particularly acute as these regions compete for limited barrels against higher-buying-power markets in Europe and the US. Those who fail to adapt risk being stranded in a high-cost, low-yield operational model.

The diesel price, the average for the year, is going to be much higher than in 2025. Zooming into the diesel price from the first of January until now, the price is almost 70% up, so it has an impact on the operational cost of the mine, but not only the operational cost of the mine.

Tshipi Borwa exports about 3.5-million tonnes of manganese ore annually, yet Exxaro estimates 46% of production is still transported by road. That means more than 1.5-million tonnes continue to rely on trucking before reaching export terminals at Gqeberha and Saldanha.

Road haulage is substantially more expensive than rail because it is heavily exposed to diesel prices, labour and maintenance costs. As diesel prices rise, the cost of moving each tonne of ore increases, eroding export margins. Until rail capacity improves, logistics, not mining, will remain one of the biggest constraints on profitability for South Africa’s manganese exporters.

The mining sector’s ability to navigate this period of geopolitical fragmentation will depend on its capacity for long-term strategic planning. The era of cheap, abundant diesel is being eclipsed by a period of sustained supply-chain friction.

To maintain productivity and institutional trust, industry must transition from reactive cost management to a proactive model of energy-resilient capital allocation.

Only through structural reform and disciplined investment in alternative energy and logistics can miners decouple their future from the volatility of the global diesel market.

• Mabasa is an executive manager in the office of the deputy minister of mineral and petroleum resources.

Sowetan