After the shocks of the credit crisis in late 2008, the global
coking coal trade declined by 5.4% as a result of reduced steel
production in OECD (Organisation for Economic Co-operation
and Development) economies. The reduction whilst large in the
OECD countries was offset by China’s rapid domestic-led
consumption resulting on only a 7.4% global reduction in steel
production. As the global economy recovered in 2010 steel
production recovery was a primary factor in the OECD and,
combined with China’s steel growth, resulted in a 15% global
growth which in turn impacted on a substantial upturn in coking
coal trade. As steel production continues to grow the seaborne
coking coal trade will rise with this as the table below highlights.
A major factor in this trade is the high level of reliance [60%]
on Australian coking coal supply and with it an exposure to
short- and long-term shocks. The floods in Queensland are
currently creating this exposure although at a time when
demand levels are traditionally weaker but has nevertheless
forced up the price of metallurgical (met) coal. It is therefore
desirable that new sources of coking coal from new supply areas
are exploited to minimize this exposure.
 
MOZAMBIQUE COKING COAL DEVELOPMENT
Whilst reported before, an exciting development in the last year
has been the met coal potential which is being developed in the
Tete Province region of Mozambique through the Moatize
project owned by to Vale and Tete through the Riversdale Benga
and Zambeze projects. These projects are now reaching their
final phase of development and should start the first exports of
coking coal through the port of Beira in the latter half of 2011.
However there is still a lot of work to be done in respect of
logistics but work is progressing well.
The success of these projects does present a significant
competitive tonne mile advantage for Mozambique against
certain market supply today and as per the table below it can be
seen that both India and Brazil are well positioned in this respect.
This could also present some short-term advantage in the
type of vessel used, as in the early phase the ability to use large
vessels may be difficult in light of draught restrictions in Beira
but shorter distances may make Supramax tonnage competitive
vs. long-haul larger Capes.
The coking coal projects have three potential options for
transport of coal from Tete with rail ex Tete via the recently
completed Sena line to Beira (575km) being the first and nearing
completion. Option 2 is considered technically feasible and
involves the barging of coal along the Zambezi River to Chinde
north of Beira. At Chinde a transshipment operation would be
required to load into vessels and there is a potential to load
20mtpa (million tonnes per annum) through this channel. This
has a 2013 readiness date attached if it was to go ahead.
The final option would be a rail line from Moatize through
Malawi to the northern Mozambique port of Nacala which is
906km away (see below map). This requires 120km of new
railway track as well as upgrade to existing track and some
significant investment in the port of Nacala. The latter port has
huge advantages given its natural deep water draught (15
metres) which would allow Panamax and small Capesize vessels
to really exploit the economies of scale. The option has a 2016
start date attached so is some way off but with the potential to
handle 40mtpa if feasible is the real growth potential option for
the future.
Whilst options 2 and 3 look exciting for the future, the
present is now in terms of Beira option 1 and it is worth
looking at developments of this project further given its
imminent start date.
 
SENA RAIL LINE
This is complete, and both Vale and Riversdale will be using their
own rolling stock and sourcing locomotives from various
suppliers. Initial rail capacity will be 6mtpa based on a cycle time
of 41 hours (Moatize–Beira–Moatize) requiring eight trains per
day, handling 2,500 tonnes per train to achieve this. There are
funds in place to expand the line to 15mtpa but for 2011 and
2012 it is likely the early phase of 6mtpa is the best possible.
BEIRA PORT DEVELOPMENT
This is a key phase of the development both in terms of
quayside upgrade and navigation into Beira port itself. Beira has
traditionally been a low-draught tidal port which has seen a lack
of investment over recent years and the entrance channel
(Macuti Channel) requires constant dredging. Thanks to
investment by the European Bank, CFM (Mozambique Railways)
and the Dutch government, dredging commenced in July 2010
and is nearing completion where the channel will then have eight
metres chart datum by July 2011. At high tides this will generally
allow 10–11 metres of draught and the ability to load a
Handymax vessel to 46,000 tonnes cargo.
Given the need to maximize loading capacity there are plans
to run a transhipment operation in an area 24nm (nautical miles)
out at sea to Panamax/Capesize tonnage and as such the loading
vessel in Beira would need to be specialized in order to run this
operation. Transshipment loading rates in the loading area at sea
are estimated to be 4,000tph (tonnes per hour). Whilst
transshipment operations are quite common where ports have
limited draught, there is possibly a balance between loading a
Handymax vessel direct to destination port with marginally
higher per tonne cost vs. a transshipment operation with costs
to much lower per tonne cost achieved by using a larger bulk
vessel and therefore likely the final operation could be a
combination of both modes depending on market rates/and
destination.
In Beira, port development has started at berth No. 8 for the
shiploading and is developing well (key resurfacing etc — see
picture on p14) and, when complete with shiploading cranes. this
will be able to handle load rates of 2,400tph allowing completion
of a vessel within 24 hours. At these loading rates it can be seen
that the potential for 20mtpa through the berth would be
possible.
Behind No. 8 berth, work is already under way for the
landside operation covering railway unloading and stacking at
2,000tph with a stockpiling area capable of holding 300,000
tonnes. Importantly, reclaiming at 2,400tph from the stockpile
allows the shiploading rate planned.
 
SUMMARY
Whilst there is still work to be done in
completion of the Moatize — Beira supply chain
this has progressed well over the last six months
and is on track for completion to see the first
vessels loading from Q3/2011. Whilst 2011 will
see some reasonable tonnage moved, full-scale
operations can only be expected by 2012 in
realizing the full short-term potential of 6mtpa
throughputs. The longer-term potential is also
there for further growth through Beira and the
other options which could place Mozambique
strongly on the world map as a major supplier of
coking coal. Given the demands of the growing
world steel trade and consumption it is essential
this project is successful and all signs are that it
will be given the significant investment and drive
that has taken place so far.