Bloomberg News

Essar, Mozambique Agree to Build Iron Ore Terminal at Beira

June 08, 2011

(Updates with company comment from second paragraph.)

June 8 (Bloomberg) -- Essar Group, with interests from steel to communications, said it’s agreed to build a 20 million metric ton a year iron ore terminal in Mozambique amid surging demand for the steelmaking ingredient from China and India.

The terminal, at Beira in central Mozambique, will ship surplus output from the company’s Mwanezi and Ripple Creek mines in neighboring Zimbabwe, Firdhose Coovadia, resident director for the Middle East and Africa, said at the Africa Iron Ore Conference in Cape Town today.

Essar, based in Mumbai, is boosting its reserves of iron ore and coal, both key ingredients for steel, after prices jumped on increased demand from Asia. Iron ore has gained almost threefold since 2008, while Morgan Stanley last month forecast a “buoyant pricing environment” for coal for most of the next five years.

In May, Essar agreed to buy a 54 percent stake in Zimbabwe Iron and Steel Co., a steelmaker which hasn’t operated since 2004 because of mounting debts and ageing equipment. Essar plans to invest $750 million reviving the company, it said on May 9.

Essar may also build a 20 million ton a year coal terminal at Beira to export excess production, Coovadia said. It may buy or “participate” in two additional coal mines in Zimbabwe, he said, without commenting further.

Rising Steel Output

“The mines will first serve the steelmaking operations, after which we’ll look at export potential,” he said, declining to comment on the likely cost of the projects.

Zisco, as the Zimbabwean steelmaker is known, will start producing steel within about 12 to 15 months of the deal closing, which is expected within a “couple of weeks,” Coovadia said. The mill will initially produce at an annual rate of about 500,000 tons before eventually boosting output to about 1.2 million tons, he said.

Essar may also build a further “greenfield” iron ore port north of Beira, Coovadia said. “The new port is a thought at this stage, and will depend on potential demand.”

--Editors: Alastair Reed, John Deane.

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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