Mozambique Mining: After Nacala coal terminal inauguration, Country foresees a brighter future for coal industry

The consortium formed by the Brazilian mining giant Vale, the Japanese multinational Mitsui, and Mozambique’s public owned port and rail company, CFM, on Friday formally inaugurated the Nacala Logistics Corridor (CLN), the new railway and coal terminal which Vale believes will be determinant for the success of its coal mining operations at Moatize, in the western province of Tete.

CLN, in which Vale is the largest shareholder, is an investment of 4.4 billion US dollars. It includes a railway 912 kilometres long, running from Moatize, across southern Malawi, and eventually reaching the new mineral port at Nacala-a-Velha, on the coast of the northern province of Nampula.

Speaking at the inauguration ceremony, which was also attended by Mozambican President Filipe Nyusi, the Brazilian Foreign Minister Aloysio Ferreira declared “Vale has arrived and it has come to stay”. He stressed that the new Corridor was of great economic importance for both Mozambique and Malawi.

He believed CLN would increase the productivity of the Moatize coal industry, reduce trade costs, and lead to the emergence of other investments.

Reducing the costs of mining and exporting coal has always been one of the major challenges facing Vale’s Mozambican operations. The Vale open cast mine at Moatize has been running at an enormous loss, partly because of low world market prices for coal, and partly because of logistical constraints.

Until CLN became operational, Vale depended on the Sena rail line from Moatize to the port of Beira. But Beira cannot handle giant mineral ships and is a port that needs continual dredging.

Nacala Bay, on the other hand, is considered the best deep water harbor on the east African coast. It does not require dredging and can accommodate ships of any size.

“The Nacala Corridor will make it possible to reduce substantially the costs of production and transport of coal due to the large volumes involved. This will be determinant for the success of the Moatize coal industry”, a Vale spokesperson told reporters.

Although CLN was only formally inaugurated on Friday, it began its operations in early 2016. Last year the Nacala-a-Velha port exported 6.5 million tonnes of coal, and this year exports are expected to reach 11 million tonnes. Within the next two years the railway and port are expected to reach peak capacity of 18 million tonnes of coal a year. It can carry an additional four million tonnes of assorted cargo.

“Vale has no control over world market prices of coal, which depend on supply and demand”, the company source said. “But increased volumes of production and exports will reduce operational costs, help the company become more competitive, and allow Vale-Mozambique to run at a profit”.

Since it started mining in Mozambique, Vale always complained that the high operational costs were damaging its investment, leading to accumulated losses of tens of millions of dollars. “It was necessary to align the cost structure with the international market”, said the Vale source.

Vale was frustrated by the lack of adequate capacity on the Sena line. The line had been rehabilitated, but never reached its theoretical capacity of transporting six million tonnes of coal a year.

“The maximum it carried was a bit more than four million tonnes a year”, said the Vale spokesperson. “The Sena line is a railway with many structural limitations”. And since Beira port cannot handle large vessels, the Vale coal shipments were sometimes transshipped onto larger ships on the high seas – an operation that is unnecessary at Nacala-a-Velha.

A Vale operational analyst, Hector Cumbana, said that to date the largest shipment of coal from Nacala-a-Velha was 187,000 tonnes. “The port of Nacala-a-Velha has no limitations in terms of cargo capacity”, he pointed out.

The modern equipment installed at the port allows ships to be loaded with coal at the rate of 5,000 tonnes an hour. The capacity of the railway is also impressive. The Vale coal trains consist of 120 wagons, and are 1,650 metres long. Each train can carry around 7,560 tonnes of coal. After arrival at the port storage facility (which can hold a million tonnes), the coal is transported to the ship by a conveyor belt that is 13 kilometres long.

The port is self-sufficient in energy and water. It has its own generator group that can produce six megawatts of power, and draws water from a desalination plant. It also has a system for treating and recovering waste water.

Currently the port receives an average of nine to ten ships a month. The main markets for Moatize coal are Asian and European countries.

CLN provides direct employment to 2,053 workers, while a further 1,600 are employed by companies that depend on the corridor. According to the CLN human resource manager, Ines Correia, only 8.5 per cent of the work force are foreigners. About 12 per cent of the workers are women.(Source: By Elias Samo Gudo, AIM)