EIU expects coal to be the Mozambique’s largest source of export earnings

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The Economist Intelligence Unit said yesterday that coal would probably be Mozambique’s largest source of export earnings in the medium term, following increased security in the centre of the country and rising international prices, according to Lusa.

“Although the global outlook does not offer much comfort to a country relying on the sector, we anticipate that increasing production will make coal the main source of export revenues in the medium term,” experts at the economic analysis unit of the British magazine The Economist write.

In the analysis of the coal sector in Mozambique sent to investors yesterday, to which Lusa has access, analysts write that “after a period when prices hit bottom and security risks rose sharply, there is renewed energy in the coal industry in Mozambique”.

The EIU says companies’ optimism and renewed commitment is justified by two reasons. “The first is the international price, which has rebounded strongly since it hit its ten-year low in the first quarter of 2016; the other is an improvement in the security situation in the centre of the country, with fears of attacks on coal transport infrastructure fading.”

With reserves estimated at more than 20 billion tons, the government has “repeatedly stated that Mozambique can be one of the 10 largest producers of coal”, and the commitment of the companies involved seems to confirm this optimism.

In its sector analysis, the EIU cites as examples of business optimism in the country the sale by Brazilian Vale to Japanese Mitsui of 15 percent of the Moatize mine in Tete province and 50 percent of its participation in the Nacala Corridor.

It further states that “an increase in Moatize mine production from 8.7 million tonnes in 2016 to 13 million in 2017 and 18 million in 2018 would probably be sufficient for coal to exceed aluminum as the largest source of Mozambique’s export revenue this year”.

Another example cited by the EIU is the consortium of five Indian companies – International Coal Ventures Limited – which announced the re-launch of operations at its Benga mine. Jindal Power and Steel resumed production at its Chirodzi mine in October 2016.

“Although the coal industry is not immune to trends dictated by China, momentum in India, its main export destination, is more important,” the analysts conclude. “With annual growth of 5 percent in demand, the investment of Indian companies in Mozambique and the slowing of plans to increase domestic supply, we believe that the country will continue to be a key market for Mozambican coal.”

Source: Lusa

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