Essar Ports ventures overseas with Mozambique coal terminal deal

Essar Ports Ltd has won a deal to develop a 20-million-tonne (mt) capacity coking coal loading terminal at Beira Port in Mozambique. This is the first overseas venture of the port operating unit of the Essar Group as it looks to ramp-up third-party cargo handling.

New Coal Terminal Beira SA (NCTB), a subsidiary of Essar Ports, has signed a concession agreement with Mozambique’s Ministry of Transport and Communications for developing the greenfield multi-user coal terminal at Beira Port. The terminal will be developed in two phases of 10 mt each, with the first phase costing $275 million and expected to start operations in the first quarter of 2020.

Essar Ports will own a 70 per cent stake in NCTB with the balance held by Portos e Caminhos de Ferro de Moçambique, according to CEO and Managing Director Rajiv Agarwal.

The African continent accounts for 4 per cent of the world’s total coal deposits. Currently, South Africa is the major producer of coal in Africa. In 2012, Mozambique surpassed Zimbabwe to become the second largest coal producer.

The total coal reserves in Mozambique alone is expected to be more than 13 billion tonnes with a reserve of 4.7 billion tonnes in Tete province. The existing captive cargo evacuation capacity in Beira run by Brazilian miner Vale is limited to 6 mt.

Miners such as Vale, Indian Coal Ventures Ltd (ICVL), Beacon Hill Resource and Jindal have started their operations in Mozambique resulting in increased production from 0.4 mt in 2010 to 11 mt in 2014 reflecting a huge opportunity to participate in the development of multi-user coal terminal. These prospective clients of NCTB have already evinced interest in the terminal and have expressed their willingness to sign long-term “take or pay contracts”, Agarwal said. The multi-user coal terminal envisages unlocking the untapped potential of Mozambique’s coal exports through Beira port. The prime function of NCTB is to serve as the evacuation point for exporting coal from Tete / Maotize region of Mozambique to cater to the increasing coal demand, especially from the Indian markets, in view of the notably lower voyage costs as compared to Australia, South Africa or Indonesia.

At current prices of coking coal, it makes economic sense for the miners to use Beira port for exporting coking coal, rather than using Maputo and Nacala, which due to high logistics cost, would possibly result in losses, Agarwal said.

NCTB also provides the much-required gateway for imports and exports between the landlocked hinterland countries of Mozambique namely Zimbabwe, Zambia, DRC, Malawi and Botswana and forms the most central and shortest sea route connectivity to the Indian sub-continent and the Middle-East for all these countries.

Coking coal availability Availability of coking coal at optimum price and quality remains a challenge for the Indian steel sector, industry sources said. “In the absence of sufficient supply of quality coking coal from domestic market, industry has depended on imports and this situation will continue in view of India’s low coking coal reserves. India’s coking coal imports were 50 mt in 2016 with an annual growth of 14 per cent. India’s coking coal imports is expected to reach 85-100 mt by FY2020 in view of the Indian steel sector market outlook,” a Mumbai-based industry official said.

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