ASSESSMENTS
Special Series (Part 2): Unrealized Potential in Mozambique's Coal Industry
May 17, 2012 | 12:37 GMT
Stratfor
Summary
Editor's Note: The following is the second installment of a series assessing the infrastructure required for southern Africa — South Africa, Mozambique and Botswana — to capitalize on its coal production potential.
Mozambique is poised to become a significant coal exporter. With an estimated 23 billion tons of reserves, the Zambezi coal basin in central Mozambique could produce as much as 100 million tons of coal per year by 2020. Were production to reach this number, the southern African nation would become one of the world's top coal exporters.
The problem is getting the coal to market. Mozambican rail and port infrastructure fall well short of the country's mineral export potential. In fact, Mozambique's main freight rail line only recently received the upgrades necessary to resume transporting coal; frequently coal is shipped by road, which is expensive and inefficient. Mozambique needs billions of dollars in infrastructure improvement to harness its coal production capability, but the Mozambican government is poor and must rely on foreign mining companies to shoulder the costs of development projects. Multiple companies already have shown interest in developing Mozambique's mining infrastructure, due in large part to the country's abundance of highly profitable coking coal.
The government hopes that foreign investment in mining infrastructure will translate to infrastructure development in other sectors. While this is unlikely to happen, Mozambique will gradually reach its coal production potential over the next decade if export demand for the commodity remains high.
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