* Moatize-Macuse railway plan developed by Bangkok-based IDT
* President says 2018 target for completion of rail line
* But project timing difficult due to low world coal prices
* Mozambique coal ambitions face setback in depressed market
By Pascal Fletcher
MAPUTO, July 22 A Thai-Mozambican consortium has
set a 2018 target to commission a $4.5 billion coal export
railway and port terminal project in central Mozambique, but the
depressed global coal prices outlook made the timing "tough",
the company's president said.
Late last year, Mozambique's government picked Bangkok-based
contractor Italian-Thai Development Pcl to construct
the 537 km rail line from the Moatize coal mines in Tete
province to Macuse on the coast in Zambezia province.
The project forms part of ambitious plans made by Mozambique
with foreign investment partners to become a major exporter of
metallurgical and thermal coal to the global market, based on
estimated reserves of at least 2 billion tonnes. These are the
world's fourth-largest untapped recoverable coal reserves.
Companies like Vale of Brazil and Rio Tinto
have invested billions of dollars, helping
Mozambique launch in 2011 as a coal producer and exporter.
But a downturn in global prices has now raised serious
questions about whether Mozambican coal can be competitive,
given the huge costs involved in expanding the southern African
nation's limited rail and port infrastructure to bring large
quantities of new coal to the market.
ITD, one of the largest contractors in Southeast Asia, has
formed a joint venture with Mozambique's state railways CFM and
private company Codiza to develop the Moatize-Macuse rail and
port project, which needs to operate at an initial 25 million
tonnes per year capacity just to be economically viable.
Mozambique is currently exporting around 5 million tonnes of
coal, and is developing capacity to rapidly increase this.
John Bovard, president of the Thai Mocambique Logistica,
S.A. venture, told a conference that the project feasibility
study, being carried out by ITD and the China Rail Construction
Company, should be completed by the end of this year. Actual
construction was seen taking three years.
"The target is 2018 to have the train line commissioned,"
Bovard said, speaking at the 5th Mozambique Coal Conference
being held in the capital Maputo.
With global coal prices depressed and expected to remain so
in the next few years, Mozambique's coal mining partners face an
uphill struggle to reach profitability and have been lobbying
the government to help them ease logistics costs.
It is precisely the lack of available modern railways and
ports that places Mozambique at a big costs disadvantage when
compared with major coal producers like Australia, putting big
new projects under pressure at a time of low coal prices.
"We are conscious that this is not great timing for this
project ... the timing is not of our making. It's tough," Bovard
said, responding to questions from the conference floor.
He said however the project had the potential to unlock and
bring to the international market millions of tonnes of new coal
currently viewed as "stranded" underground in the huge Tete coal
deposits because of the shortage of export rail infrastructure.
Despite the challenging market conditions, Brazil's Vale is
also pressing ahead with its own $4.5 billion project developing
a 900 km rail corridor from its Moatize mine to Nacala port in
northern Mozambique. The first coal train on this new line,
which will cross the small neighbouring nation of Malawi, is
expected to run by the end of the year to Nacala port.
"The trains make the mines economic, and the mines make the
trains economic," Bovard said. But global coal prices also have
a key role in the equation for such projects to be viable.
The Moatize-Macuse rail-port project, which foresees
deep-water container and general cargo facilities as well as a
coal export terminal at the port, will need existing major coal
miners operating in Tete to come onboard with shipments.
Bovard said he would approach these operators when the
feasibility study provided a clearer picture of the economics of
the Moatize-Macuse project.
Mozambique's ports development plan sees a massive ramping
up of tonnage handling capacity over the next 6 years to 2020,
as a country still stricken by widespread poverty and recovering
from a 1975-1992 civil war hopes to benefit from huge coal and
offshore natural gas deposits discovered in recent years.
Mozambique's own infrastructure deficit reflects a situation
existing across Sub-Saharan Africa, where the potential of
exploiting untapped national resources is being held back by
the absence of road, rail and port networks to get the oil, gas
and minerals out easily to world markets.
"(Africa's) transport and logistics costs are the highest in
the world for the continent that can least afford it," said
Barbara Mommen, chief executive officer of the Maputo Corridor
Logistics Initiative, which promotes the major transport
corridor linking Maputo port to South Africa and the surrounding
(Editing by William Hardy)