More capacity for Tete coal

While the future direction of international coking and thermal coal prices remains uncertain, Mozambique continues to get on with the business of putting rail and port infrastructure in place.

Most recently, Indian firm Essar signed an agreement with the government of Mozambique to develop a coal terminal at the Port of Beira, while progress has been made on developing another new coal export railway, from the Tete coal mines to the planned new port of Macuse. Indian firms are financing much of the new investment, underlining where much of the new production could be headed. 

Essar Ports Limited (EPL) and state-owned Portos e Caminhos de Ferro de Moçambique (CFM) have signed a design, build, own, operate and transfer (DBOOT) contract with Maputo to build the new coal terminal at Beira, with handling capacity of 20 Mtpa, and then operate it under a 30-year concession.

The exact location of the terminal has not yet been determined, but the existing port suffers from silting. At present, coal is exported from Beira by lighters that carry it out to bulk carriers. 

The terminal joint venture, called New Coal Terminal Beira, will be 70% owned by Essar, and 30% by CFM. Construction costs on Phase 1, which will provide 10 Mtpa, are expected to be US$275M. Essar already operates five coal terminals in India, which are likely to handle the coal shipped from Mozambique.

Opportunity

Rajiv Agarwal, CEO of Essar, said: “There are massive coal reserves in the location, and limited infrastructure. We found that a good opportunity. It will not only boost coal exports from Mozambique and strengthen its economy, but also deliver significant direct and indirect benefits.”

The latter seems to be a significant selling point for  the government of Mozambique, which is keen to ensure that the huge coal and gas investment being made in the northern half of the country brings more than just export revenues. 

As previously reported (Bulk Materials International, July/August 2017, p2) a third railway is to be built by Mota-Engil and China National Complete Engineering Corporation (CNCEC) to export Mozambican coal. 
 
The line will run for 480-500 km from Moatize to a new port at Macuse, which is to be built by Thai Mozambique Logistics (TML). TML has now announced that the scope of the railway has been expanded to include a 125 km  extension from Moatize to Chitima,  still in Tete, where there are undeveloped coal and iron ore reserves.

Construction work on the project, which will be owned by TML (60%), CFM (20%) and Corredor de Desenvolvimento da Zambézia (Codiza) (20%), is due to begin late next year, according to the government, with the first coal carried in 2021. Maputo has also issued a new estimate for the project’s construction costs – US$1.9B for the railway and US$810M for the port. 
 
According to the head of the Mozambican Ministry of Transport and Communications’ legal department, Luis Chauque, this is lower than the previous total estimated price tag of US3.3B, because of regulatory changes by the  government that were passed in August.

Question marks

One thing that is not yet clear is why Macuse is being earmarked by the government as handling more coal than either of the two existing coal ports, Beira and Nacala. The existing plans suggest Phase 1 handling capacity of 25 Mtpa at Macuse, rising to 100 Mtpa in stages.

The port will be able to serve vessels of up to 80,000t but Nacala could certainly handle vessels larger than that. It is widely regarded as having the biggest natural harbour anywhere on the east coast of Africa. 
 
 
Elsewhere, the governments of Malawi and Mozambique have already agreed to expand the capacity of the new Nacala Development Corridor, which contains the coal line that runs from Tete, through Malawi and back into  Mozambique, and on to the Port of Nacala. 
 
 
In a bilateral deal signed in September, the two governments agreed to ensure US$2.5B of additional investment into the line, so as to foster “economic growth by promoting and coordinating economically viable businesses in the transportation, agriculture, trade, mining and tourism sectors”. The Nacala line was only completed last year. No details of the additional capacity to be added have been revealed.

ICVL shifts focus

Continued high transport costs have prompted India’s International Coal Ventures Ltd (ICVL) to reconsider its coal export plans. It had planned to use the Port of Beira, but has now opted for Macuse for its coking coal exports. P. K. Singh, chairman of ICVL, said in September: “We have floated a tender for mining coking coal, and will be awarding the work soon. Some 35% of the deposit at our Mozambique mines is coking coal, and we intend to have it mined and shipped home.” A separate tender for thermal coal from its Moatize mines has been launched.

The company is also considering the possibility of using coal from its Benga mine to produce methanol for export to India. Gas liquefaction is probably not viable at current natural gas prices, but it may become a commercial  proposition in the long run. Coal-to-gas production is common in neighbouring South Africa, where Sasol is one of the leading lights in the global synthetic fuel industry. ICVL is a consortium of Indian companies that was set up in 2009 in order to acquire overseas coal assets to supply the Indian steel industry.

Rebel attacks

The coal logistics industry faces one challenge in Mozambique that it does not have to confront in many other parts of the world. Rebel group Renamo has periodically carried out violent attacks on coal trains operating on the Sena line, killing personnel, and leading to the suspension of coal transport. It has been revealed that Vale and CLN awarded a contract to SVI Engineering earlier this year to bullet-proof 110 locomotives to protect its trains.

Bullet-proof glass and armour plating has been installed on the engines to safeguard drivers. Each locomotive is fitted out over the course of a few hours, in order to avoid taking them out of service. Vale is gradually ramping-up coking coal production at its Moatize mine. Output in the second quarter of this year was 2.05 Mt, up 92% on the same period last year. Vale Moçambique has already developed a coal terminal at Nacala.