Focus: Private Ports & Rail

Move Out

Move Out

May. 9, 2013

As the mining industry demands more from the country's infrastructure, the government must find new ways to expand its limited capacity.

WHICH WAY?

One of the main strains on the current infrastructure is the fact that Mozambique is trying to export huge quantities of coal on a signal railway, the Sena Line. It is the only link between the remote coalfields of Tete and the ports on the east coast. Therefore, if something happens along the way, all exports stop, as happened in February 2013 when a section of the line was flooded, and Brazil's Vale had to invoke the force majeure clause in its contract for two weeks as shipments shut down. The Sena line is under serious strain from the coal companies and the population of the country, and was only able to move 3 million tons of coal in 2012, less than half of what was projected. In 2009, the British-Australian company Rio Tinto and other mining companies were actively seeking to use the Zambezi River to transport coal for two reasons: first, it is almost 300 kilometers shorter by river than it is by rail, and second that it is almost an exclusive form of transport for the coal industry, unlike the railways. One of the major problems for Mozambique is that the lack of rail infrastructure in the first place, it cannot allow for an exclusive rail link for the coal industry, as there is no alternative for the population. In the end, the government would not allow the Zambezi River to become a transport link for the coal industry because of the environmental impact it could have on the surrounding area.

THE VISION

The government has a 2020 vision of exporting 120 million tons of coal. To do this, it needs to improve its links, and the most cost-effective way for the government to do this would be via private investment, which has already begun. In February 2013, Mozambique Ports and Railways (CFM) signed an agreement with Vale to upgrade the Nacala Corridor, which would reach from the border of Malawi all the way to a new coal terminal at Nacala-a-Velha. The project would also consist of upgrading a line in Malawi from the border with Mozambique to Nkaya. As well as this, Vale will also construct a new line from Nkaya to Mozambique's western border, where it will connect with Moatize coalfield line. The whole project is expected to cost around $4.4 billion. The government has also launched a tender for a $3 billion project in Tete. There were 21 bidders in the beginning, but as of April 2013 there were six remaining, with Rio Tinto the frontrunner. The tender is for a 525-kilometer rail link from Tete to Macuse in Zamb├ęzia Province, as well as building a new port with a capacity of 25 million tons of coal per year. The port will also be built with the potential to double capacity if the need arises. The government hopes that this tender will be completed in the next few years and the Minister of Transport and Communications, Paulo Francisco Zucula, hopes that this will increase the total export capacity to 30 million tons per year. However, since the mining companies are not allowed an exclusive line, it will also need to accommodate passenger trains for the local population.

The Port of Beira in the north, close to Tete, and the ports of Maputo and Matola in the south are the main exports hubs of Mozambique at the moment. The southern ports have a current export capacity of 15 million tons of coal per year. The ports are owned by Grindrod and Maputo Port Development Company (MPDC), while MPDC is a joint venture between the Mozambique Railway Company, Grindrod, and DP World. The ports are the most southern in Mozambique and are in need of upgrading, as demand is extremely high. The Matola Port is more specialized in coal and bulk transport, while Maputo generally handles cargo and other exports. Grindrod and MPDC have pledged to invest $1.7 billion over the next five years to meet the growing demand. The investment plans to increase the capacity up to 50 million tons per year by 2020. The first installment of $355 million has been approved for 2013 and 2014 and will increase Matola Port's capacity to 7.2 million tons by 2014.

THE WAITING GAME

Mozambique's underdeveloped infrastructure may help the country in the short term. The coking coal market is oversupplied at the moment and prices are low due to lower demand from steel mills because of production issues in China. Mozambique's coal is of a high quality, and mining companies are hoping by the time the new capacities start to come online, prices will have moved back up to the highs of 2011 and market supply will have tightened back up again.

Investments are coming into Mozambique, but companies remain skeptical as to whether infrastructure can meet export targets. Either way, infrastructure all over the country is getting a much-needed revamp and capacity will increase over the next few years.

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