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Mozambique port critical to chrome exports gets upgraded railway link

21st February 2024

By: Bloomberg

  

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The biggest port in Mozambique that’s become a key hub for global chrome exports will upgrade a railway link, bolstering a planned $2-billion capacity expansion.

The African Development Bank is financing the purchase of $40-million of locomotives and wagons and another $30-million is under consideration from the Development Bank of Southern Africa for improvements on the line that connects the Port of Maputo with South Africa, according to the AfDB. The DBSA declined to comment.

The funding will help switch millions of tons of minerals such as chrome that are transported by truck to rail, reducing costs and cutting road traffic by as much as 40%, Cesar Mba Mbogo, the AfDB’s country manager, said in an interview.

Neighboring South Africa’s port and rail volumes have collapsed because of corruption and theft, raising the appeal for exporters to use Maputo instead. As a result, the reliance on trucks by chrome, iron-ore and coal miners to move their products to port has led to border logjams that stretch as long as 35 km as volumes continue to rise.

Freight costs are about 40% more a ton by truck than by rail, according to Minerals Council South Africa, a mining lobby group that estimates that more than half of South Africa’s chrome travels via Maputo. The Glencore–Merafe joint venture in the country estimates road transport is used for about 70% of its exports.

South Africa accounts for more than 60% of global chrome ore supplies and about one-fifth of global production of ferrochrome, a more processed form that’s used to make stainless steel, according to Luke Nickels, senior analyst at CRU in London.

A consortium including DP World Ltd. and Mozambique’s Portos e Caminhos de Ferro de Moçambique — or CFM — will this week sign a deal with the government to extend its port concession to 2058. The concessionaires will spend more than $2-billion to expand the port capacity to 54-million tons a year from 37-million tons.

CFM is also nearly doubling the capacity of the railway link from the South African border to Maputo. Mozambican Transport and Communications Minister Mateus Magala said at least 60% to 70% of cargo should arrive by train.

“The figure should be opposite,” he said in an interview in Maputo. “We expect in the next three months to see some policy-driven model shifts.”

A key hurdle to getting minerals off trucks and onto trains is that CFM’s operations end at the South African border, said Osório Lucas, chief executive officer at the Maputo Port Development Co.

“South Africa will have to play ball,” he said in an interview.

Edited by Bloomberg

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