Opinion: Could new railway cut costs enough? – Joseph Hanlon

Nacala Corridor Project - ferrovia_mocambique
The Nacala Corridor railroad from Moatize – Tete to Nacala coal Terminal in Nampula

Vale Mocambique lost $212 mn in the first half of the year, it reported on 28 July. Production and transport costs have reduced the cost of a tonne of coal delivered to Nacala port from $168 to $103, but the value of high grade coking coal is still only $84 per tonne – so the company loses money. In the first half of the year, Vale’s Moatize mine produced 1.4 million tonnes of metallurgic (coking) coal and 740,000 tonnes of thermal coal.  

The railway line from Moatize to Nacala via Malawi is 912 km. Vale had been sending coal on the shorter (and thus less expensive) 575 km rail line to Beira, but this has been suspended by Renamo attacks – which have also delayed upgrading work to double capacity from 6 to 12 million tonnes of coal per year. The line is single track and the work is to double the length of the two track sections which allow trains in opposite directions to pass. Current trains are limited to 42 wagons and 2 locomotives while the rebuilding will allow to 100 wagons and 6 locomotives. (Noticias 9 July)

Meanwhile public consultations have begun on a new railway from Tete to a new port at Macuse, Zambezia, 35 km north of Quelimane, which could carry 25-100 million tonnes of coal per year. The concession to build the line was granted to a company called Italian-Thai Development Mozambique (part owned by Mozambique railways, CFM) in 2013, but falling coal prices have delayed the project. The 525 km line involves a new railway parallel to the existing one from Moatize to Mutarara opposite Sena on the Zambeze river, then constructing 129 km of new railway to the coast, then constructing a deep water offshore port. The reason for constructing a new line rather than doubling the existing one is that the new railway would not be compatible with the existing rail system. Southern African railways were all built to a gauge of 3ft 6in (1067mm) between the rails, and the proposal is that the new line of Macuse should be standard gauge – 1435 mm – which would allow the use of larger wagons. The project would cost $3-4 bn, and there is not yet an obvious source of funding. For more details:http://www.slideshare.net/informaoz/jose-fonseca-thai-mocambique-logistica-sa

Mozambique is also looking for $400 mn to rehabilitate the 317 km railway from the Zimbabwe border to Beira.

Only Vale is now producing coal. Indian company ICVL which bought the Rio Tinto mine which had been Riverdale has suspended exports. Jindal and Beacon Hill have not started.

After a decade of fruitless negotiations, largely with South Africa, it now appears that two coal-fired power stations will go ahead in Tete. Shanghai Electric Power and Ncondezi (majority-owned by the Africa Finance Corporation) have signed an agreement to build a $25.5 mn power station. And in March Zambia and Mozambique signed a Memorandum of Understanding (MoU) to establish a coal-powered energy plant in Tete to provide power to both countries  Zambia is facing electricity shortages because of low water behind the Kariba dam, caused by the recent drought, and in March a floating 100 megawatt power plant was opened in Nacala harbour, which will allow an equivalent amount of additional power to be sent to Zambia from the Cahora Bassa dam. The floating power station is owned by Karpowership, a subsidiary of Karadeniz Holding, Turkey.

By: Joseph Hanlon

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