INTERVIEW-Mozambique still counting on coal, despite price doldrums – by Pascal Fletcher (Reuters India – July 28, 2014)

MAPUTO, July 28 (Reuters) – Mozambique is still counting on increasing coal exports to expand its infrastructure and drive economic growth, despite depressed global prices which might delay the timing of some major railway and port projects, the transport minister said.

Gabriel Muthisse told Reuters the government was also keen to attract investors to help build the infrastructure needed to exploit huge offshore natural gas reserves in the north.

The World Bank has forecast that coal and gas may generate up to $9 billion in revenues by 2032 for the southern African state, which is still poor and recovering from a 1975-1992 civil war.

Rio Tinto , Brazil’s Vale and India’s Jindal have invested heavily in developing Mozambique’s coal deposits – the fourth-largest untapped recoverable coal reserves in the world.

But billions of dollars of investment in rail and port expansions are still needed to carry the coal from the inland Tete mines to the seaborne market.

With global prices for coal in the doldrums because of oversupply and sluggish demand, experts and producers say Mozambican coal mining operations face an uphill battle to be competitive in the next few years, especially when so much infrastructure capacity still needs to be built.

In an interview at the weekend, Muthisse said coal producers in Mozambique may face a “strategic wait” before their export operations become fully profitable, but the government remained committed to developing the coal industry as a growth driver.

“We’re still counting on coal,” the minister said.

“Our bet is that Mozambique continues to be one of those countries that keeps its coal industry open, and continues to be an important player at a world level.”

Mozambique’s current coal export capacity stands at around 6-7 million tonnes per year, with the central Tete-to-Beira line its main export outlet.

Muthisse said the country aimed to ramp this up to at least 80 million tonnes annually.

This required completing “crucial” additional railway-port projects such as Vale’s Tete-Nacala project and the Moatize-Macuse project being developed by a Thai-Mozambican consortium.

“If the coal industry goes out of business, this will affect the logistics structure of the country,” Muthisse said.

He acknowledged that depressed market conditions might impact the pace of strategic infrastructure investment. “I’m seeing more the possibility of rethinking the timetables, rather than any possibility of cancelling the projects,” the minister said.

Vale says it hopes to run its first full coal train on the Tete-Nacala line this year.

The consortium led by Bangkok-based contractor Italian-Thai Development Pcl that is handling the Moatize-Macuse railway-port development says depressed coal market conditions make the 2018 commissioning target for the $4.5 billion project “tough”.

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