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Mozambique 2016 | INDUSTRY | FOCUS: ALUMINUM

Mozambique is the second-largest producer of aluminum in Africa and the 14th in the world. Since 2000, it has been producing aluminum for export, and in 2015 Midal Cables opened a factory near Mozal; the country's largest aluminum smelter. This could be the start of a Mozambican aluminum value chain.

According to the US Geological Survey's Mineral Commodity Summaries of January 2015, Mozambique is ranked 14th among aluminum producing countries worldwide, and second in African continent, after South Africa. During the middle of the 19th Century, aluminum was considered a precious metal, more valuable than gold or silver. Napoleon reserved a prize set of aluminum cutlery for his most distinguished guests, while everyone else at banquets would have to eat with “regular" gold cutlery. In Mozambique, aluminum has played such an important role in the socioeconomic development of the country that it could be still considered the national precious metal.

The Mozal aluminum smelter, located just outside Maputo, was Mozambique's first post-war FDI megaproject, beginning in 1998 and officially opening in 2000. Mozal produces just below 570,000 tons per annum of primary aluminum. The production of Mozal alone constitutes around 7% of the country's GDP. Until now, its aluminum has been almost entirely destined for export, especially Europe. In 2015, however, a new project aimed at supplying the product to the local market may be the start of a new aluminum value chain in the country.

Midal Cables International is a Bahrain-based group that has recently finished a $70 million factory not far from the Mozal plant. Danie Murray, Asset President of Mozal, explained to TBY that the plant has signed an agreement under which it will supply 50,000 tons of aluminum to Midal. “Partnering with Midal will create additional opportunities for the service industry," Murray said. “There is the opportunity to setup manufacturing facilities downstream from Midal's operations to produce a variety of goods from the cable that Midal produces."

TBY also spoke to Orlando Marques, the General Manager of Midal Cables International Lda., who said Midal Cables produced 46,000 metric tons of aluminum rod in Mozambique in 2015. This number is close to their 50,000 tons target, an amount they hope to achieve in 2016. This production, however, is still primarily sold to the international market. In Africa, Midal is currently exporting to Kenya, Nigeria, Uganda, Tanzania, Zambia, Zimbabwe, and South Africa. It also sends products to France, Germany, Italy, Spain, Portugal, and Finland, and recently started to export to Santos, Brazil, and Houston, Texas.

As locals say, if Mozambique wants to take advantage of these foreign direct investments, part of the output should be kept inside the country and used to improve the aluminum value chain, generating wealth for Mozambicans. In terms of demand, Midal expects the local demand increase in 2016, as more industries are developing around the sector and on the way to creating an aluminum segment.

In terms of job generation, manufacturing developments are also key to the country, not only because there are more opportunities available, but also because it is the perfect way to spread knowhow and train the future workers. Midal currently has 120 employees and expects to employ another 80 to 90 in 2016.

Many day-to-day products are made with aluminum, including soda cans, ladders, nails, staples, pots, window frames, gates, and a number of vehicle parts. In fact, the Matchedje Motors plant rolled out its first Mozambican vehicle in September 2014, and Hyundai assembly's plant in Matola, not far from Mozal, has been operating since 2014. These industries and many others could take advantage of having such close access to raw material. If a well-developed value chain was created, aluminum in Mozambique may soon be considered as valuable as it was in the time of Napoleon.


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Aluminum Shower

BHP Billiton has decided to focus on five business lines, and is withdrawing from aluminum. How will this impact the company?In August 2014 BHP Billiton announced its plans to demerge its aluminum, manganese, and nickel and silver businesses along with some of its coal assets. Subject to board and shareholder approval, there would be a new company operating these assets under the name of South32, and Mozal will become quite a significant part of it. South32 will operate in five countries and be staffed by approximately 24,000 people. The business will then transition from a commodity-based structure into a regional-based entity, and Mozal will report to the African regional office located in Johannesburg. The new company will have a dedicated board and management team with a significant representation at the Johannesburg office, which will be greatly beneficial for Mozal.How would you describe the evolution of Mozal's contribution to GDP?Since the company was established in 2001, Mozal has continued to play a prominent role, contributing around 7% to GDP. We recently won an award from President Guebuza in recognition of this contribution. Currently, Mozal produces just below 570,000 tons per annum of primary aluminum ingot, with production entirely destined for export, mainly to Europe, the primary market for Mozal's metal output.What are your plans to support the domestic use of aluminum?There has been a spiking development in Mozambique's downstream industry. There was no other local market established until the development of Midal. We began delivering to Midal in October 2014 and once they ramp up their operations, we will be delivering 50,000 tons of metal per annum. Businesses can now be established downstream of Midal, creating an increased diversity of products in the downstream industry, while a unique service industry will also develop around Midal. I expect our relationship with Midal to be long term and sustainable for many years to come. The sizeable tonnage of aluminum that company will be receiving from us will be a major catalyst for the downstream industry.How would you categorize the significance of Mozal in other sectors?Mozal has played a significant role in infrastructure development, with road-access projects and a new port facility. For example, Mozal imports more than one million tons of alumina per annum through the port, which is then brought to the site by trucks. We also transport the entirety of our final product through the port, which is a considerable contribution to the transport industry.In addition to that, we continue to perform road maintenance even though it was not a part of our initial undertaking. We also direct around $2 million per annum toward our community work, some of which has gone into the construction of schools. To date we have built nine primary schools, a secondary school, a technical school, and a maintainer-training center.What challenges do you foresee over the next ten years for Mozal?One major challenge will be electricity supply. We have managed to cope with this so far by working closely with ESKOM and focusing on our productivity and operational efficiency to get more out of the available infrastructure. We have made good progress and have implemented a system we call Maximum Technical Capability. The other challenge is with commodity prices. This has been a challenge over the recent period, although Mozal has been effective with regards to cost cutting, as we have been able to focus extensively on efficiency. We also pay considerable attention to skills. All of the potential development in the country and the exploitation of its resources will result in a great need for a skilled workforce, which will present a challenge for the entire industry. 6

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