New Project Will Help Unlock Supply Chain Bottlenecks

BMI View: Mozambique continues to address the supply chain bottlenecks that are constraining greater exploitation and export of the country's vast coal resources. The latest project to be tendered will be a US$2bn port and rail project. In total , there are freight transport projects worth more than US$12bn targeting the export of coal from the Moatize basin in the pipeline ; thus, we anticipate notable improvements to the export route over the next five years.

Insufficient transport capacity is constraining Mozambique ' s ability to capitalise on its coal resources. Companies active in the sector have had to repeatedly downgrade export targets , due to delays in expanding rail capacity to transport the coal. Consequently, many have taken matters into their own hands to build the infrastructure necessary to support exports. As a result, there are projects worth more than US$12bn in the pipeline , which should support growing coal export volumes , including rail lines to the coast, and upgrades to ports .

Infrastructure Constrains Growth
Mozambique Coal Production

The most recent project to be proposed is a US$2bn railway line and port project that would carry coal 525km from the Moatize basin to Macuze in the central coastal Zambezia province. The tender is due to be released by state-owned rail and port group CFM in December 2012. It is hoped that the railway will carry 20mn tonnes of coal per annum (mtpa). It is unclear which port it would use as its end destination, as Macuze lies between Beira and Nacala, although planned upgrades to Nacala would make it the obvious choice, once complete.

The railway will complement a number of other investments to support the export of coal, which should enable an increase in coal production over the coming years:

  • Beira Corridor: The Sena railway line is Mozambique's only existing route for coal exports, linking the Moatize region with the port of Beira - thus dubbed the Beira Corridor. The railway can carry 3.5mtpa, which is insufficient. Delays in upgrading the project, which was estimated to cost US$500mn, have seriously dented the country's ability to ramp up coal exports. Vale has had to repeatedly delay plans to increase export volumes, due to insufficient capacity. The expansion of the railway to carry 6.5mtpa is now expected to be completed by the end of 2012, following a change in contractor. Upon completion of the railway, Vale will expand exports to 4.9mtpa in 2013. A further upgrade to the Sena railway is planned once the first is completed, with capacity of 20mtpa envisaged by the end of 2014.

  • Nacala Corridor: Vale is investing US$4bn in a railway line to link the Moatize basin with the port of Nacala, via Malawi. The project includes construction of a 900km railway line and upgrades to the deepwater port of Nacala. Vale is awaiting completion of the railway in order to expand its production at the mine to 11mtpa.

  • ENRC Project (Tete-Nacala): Kazakh mining company ENRC has also announced plans to build a railway and coal export terminal at the port of Nacala. Construction is due to start in 2014 and be completed in 2016. The project, which would run adjacent to Vale's Nacala corridor, is envisaged to carry 40mtpa in the initial phases. Cost estimates have not been released, but we expect it to be in the same range as Vale's plans. ENRC is hoping to increase production at its Estima project in the Tete province to 20mtpa in conjunction with the railway's completion.

  • China Nacala Port Project: China has announced it is in negotiations for US$1.5bn in financing for the construction of a deepwater terminal at Nacala. The project would be able to handle 20mtpa.

This article is tagged to:
Sector: Mining, Freight Transport, Shipping
Geography: Mozambique, Mozambique, Mozambique, Mozambique

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