The Prospects of Coal in Mozambique’s Minerals Sector

“Global coal trade has steadily improved this year and has now fully recovered to pre-Covid levels.” Banchero Costa Weekly Market Report.

Since the industrial revolution, coal has proven its ability to generate power. By the end of the year 2022, coal production was expected to increase by a margin of 0.9% to 8,126Mt. The success was attributed to China, South Africa, and India’s crucial collective output. Global Coal Production

China, the world’s largest coal producer, and consumer slowed down significantly during the second quarter of 2022 due to renewed covid 19 restrictions leading to an approximate 3% turn down in coal consumption. The slowdown was attributed to China’s weaknesses in the construction sector (non-power applications), increased hydropower generation, and generally weak global economic growth. However, an increase in demand for coal is foreseen in December and is expected to remain stable at 4,230Mt, suppose China’s economy recovers.

India’s two higher-ranking largest producers, Coal India Limited and Singareni Collieries, propelled India to register an increased output production of 460.4Mt of coal, up by 15.1% year-on-year. These two organizations consistently make up around 85%-90% of India’s total production.

To encourage rapid advancement into the sector, India’s government auctioned the Coal mines to private investors. The government had auctioned forty-seven mines as of June 2022. The Indian government has put in place supportive reforms to reduce dependency on imports by boosting domestic coal production and is expected to post a compound annual growth rate of 7.5% by 2026.

Following Indonesia’s Ministry of Energy and Mineral Resources (EMR), up until June 28, 2022, Indonesia’s coal manufacturing had outstretched up to 294.4Mt or 44.4% of the target.

During the projection period (2022–2026), Indonesia’s coal production is anticipated to remain constant at a CAGR of just 0.2% to reach 635.5Mt in 2026. Manufacturing will be influenced by the progressive closures of the Anggana (2023), Tunas Inti Abadi (2024), Bunyu (2025), PT Samantaka Batubara, and PT Karya Usaha Pertiwi projects, both to be closed in 2026.

Valued at 565.1Mt in 2022, Australian coal production is expected to grow its market at a CAGR of more than 1% during the 2022-2026 period, with a target of net zero emissions by 2050. Australia’s government intends to achieve this by gradual reduction of the large-scale carbon emitters such as resource and energy industries. 

In the second quarter of 2022, USA coal production totaled 145.7MMst, 2.2% lower than the first quarter. However, coal exports increased in the second quarter by 13.9% from the previous quarter. The average pricing for coal exports during the period was $231.68 per short ton. 

According to Banchero Costa, “Coal exports from South Africa to the European Union surged by +582.7% y-o-y in Jan-Sep 2022 to 9.6 mln tonnes from just 1.4 mln tonnes in the same period of 2021.” Costa further states that South Africa is the world’s fifth largest seaborne exporter of coal, after Indonesia, Australia, Russia, and the USA.

During global coal exports in the Jan-Sep 2022 period, South Africa accounted for 5.4%. Contrary to the past decade when export volumes had steadily declined.    

The high thermal energy content in anthracite coal has significantly increased its demand. Fortune Business Insights, in its report titled “Anthracite Coal Mining Market, 2022-2029 states; Anthracite is the most popular PCL (Pulverized Carbon Injection Product) and ULV (Ultra Low Volatile Product). It is fed directly into the blast furnace in countries such as China and India.

There has been a significant reduction in the use of coke to anthracite; the latter is a cleaner alternative. Furthermore, the exorbitant coke prices coupled with the worldwide shortage strengthened the demand for ultra-low bituminous coal. Steel mills are looking to use Ultra Low Volatile products due to their higher carbon and energy content, which provides superior performance.

Many companies have invested heavily in finding ways to improve the extraction from the already limited anthracite coal while attentive to reducing pollution levels caused by burning the various coals.

Coal minerals pricing is relatively dependent on many aspects of demand, supply chain, consumption, consumer behavior, transport, and production among other factors.  

COUNTRIES:

MOZAMBIQUE: As part of the energy transition to meet the 2030 carbon emissions target advocated by the United Nations, The Mozambican government is adamant about continuing coal mining. 

Coal remains one of the significant Mozambican exports, and apart from being a source of foreign currency to Mozambique’s economy, it makes a crucial contribution to the balance of payments. 

“A lot is said about abandoning coal, but right now, coal is the major contributor to the balance of payments, and in second place, we have the heavy mineral sands. So, we cannot abandon these sources from one day to the next because the necessary conditions must be in place for us to do this”, stated Teodoro Vales, The Permanent Secretary, Ministry of Mineral Resources and Energy, during a seminar dubbed ‘The Challenges and Opportunities for Promoting an Inclusive Energy Transition in Mozambique. 

The mineral potential in Mozambique is largely untapped. The virgin coal deposits present investment opportunities. If the mining costs rise in South Africa as expected, Mozambique will likely enjoy the regional competitive advantage. Graphite, iron ore, bentonite, tantalum, kaolin, copper, rubies, apatite, bauxite, gold, marble, and titanium are among the commercial deposits in Mozambique. 

The 9th edition of the Mozambique International Mining & Energy Conference and Exhibition, MMEC 2023, is scheduled to take place from 27-28 April 2023 in Maputo, Mozambique running under the theme of Investing to Scale up Growth, Resilience, and Sustainability in the Shifting Global Mineral and Energy Markets

This long-established high-level strategic conference is held at a pivotal moment for the industry.

Gold: The yellow-colored metal continues to contest headwinds over the final quarter.

“In reality, gold has outperformed most major assets so far in 2022, including inflation-linked bonds both in the US and elsewhere. The fact that gold has performed as well as it has, all things considered, is a testament to its global appeal and more nuanced reaction to a wider set of variables.” Juan-Carlos Artigas, head of research at the World Gold Council.

Skyrocketing interest rates and geopolitical instability are contributors to the metal’s struggle, as much as it is often bought during times of variability. 

High inflation has been among the numerous contributing factors; when the United States inflation was held steady at approximately 8% from August through to September, the UK experienced an inflation rise above 10% in July. It has been stagnant at the rate of 9% since then.

CORPORATE:

GEMFIELDS GROUP announced stopping its operations in October 2022 at the Montepuez site after an early attack at the nearby mine site, Gemrock. 

GRINDROD LIMITED intends to triple its capacity at its dry bulk port terminals in Mozambique, Bloomberg News.

CONTANGO HOLDINGS publicized the updated corporate presentation of the Lubu Coal Project in Zimbabwe (“Lubu Project”) on the Company’s website www.contango-holdings-plc.co.uk. The exhibition highlights the recent progress at the Lubu Coal Project, as we as its three-phase strategy, including sales of coking coal, manufacturing coke, and thermal coal.