Coal exports choked by dilapidated rail system
DESPITE China and other international markets showing increasing interest in Zimbabwe’s coal and value-added products of the fossil fuel, full potential for export of the commodities is being limited by the dilapidated national railway system, which requires modernisation to streamline transportation and reduce costs.
Minerals Marketing Corporation of Zimbabwe (MMCZ) marketing manager Mr Gumisai Nenzou acknowledges the ageing rail infrastructure presents a challenge in efficiently transporting bulk commodities despite interest from offshore markets.
MMCZ is a State-owned agency responsible for marketing all minerals, except gold and silver.
While Zimbabwe previously exported coke and coal products to regional markets, particularly to copper smelters in the Democratic Republic of Congo and Zambia, the market landscape has changed.
The emergence of new producers in the region has led to excess supply of the products, making it difficult for Zimbabwe to compete on that front.
On the domestic market, a recent surge in investment, with roughly 15 new ventures focusing on coal and coal value-added products, has led to an expanded domestic production capacity.
The increase has created excess capacity, which the already saturated regional market cannot absorb.
Mr Nenzou said the domestic production boom was exacerbating the bottlenecks at the export level due to the state of the rail system.
“It’s a worrisome trend and this has been one of the major challenges of developing new markets,” said Mr Nenzou while addressing journalists at a recent workshop. The meeting, organised by MMCZ, was aimed at familiarising journalists from various media houses with the corporation’s operations and global mineral marketing dynamics.
The Government is, however, actively pursuing measures to modernise the rail network, recognising its importance in unlocking Zimbabwe’s full potential as a major supplier in the global market and making the country’s abundant coal and coke resources more competitive for export.
Mr Nenzou said improved logistics would make Zimbabwe’s minerals more competitive globally, attracting new investment and boosting the country’s economic growth.
Maritime regulations
He further highlighted the broader challenges of overcoming logistical hurdles to reach new offshore buyers.
He said relying on road transportation presented a significant challenge in meeting strict maritime regulations.
Tight time frames for loading vessels are difficult to achieve with road haulage, potentially causing exporters to miss loading targets. This can result in hefty charges for “unoccupied vessel space”, further squeezing profit margins for the exporters.
“The road (transportation system) makes us less competitive in terms of logistics,” said Mr Nenzou.
“To expand into the offshore markets, we need to reduce inland costs.”
The National Railways of Zimbabwe (NRZ) network is characterised by outdated tracks, signalling systems and locomotives.
This leads to slow travel times, frequent breakdowns and a higher risk of derailments. Underinvestment in maintenance and upgrades has also left the NRZ struggling to run basic operations.
The combination of these factors has significantly reduced the NRZ’s capacity to handle large volumes of freight efficiently and made transporting minerals to ports for export slow and expensive.
NRZ’s inefficiencies not only limit mineral exports but also force companies to rely on road transportation, which is more expensive and damages roads designed for lighter traffic.
“The ailing state of our railway system, coupled with lack of investment, has significantly crippled the NRZ’s ability to handle large volumes of freight efficiently,” Harare-based economic analyst Mr Tobias Musara said.
“This translates to slow and expensive transportation of minerals to export ports, hindering our potential. Exporting minerals becomes sluggish and exorbitantly expensive due to the logistical challenges posed by our deteriorating rail infrastructure.”
Mozambique’s recent investment in upgrading the 318km Beira-Machipanda railway line, near the Zimbabwean border, presents a strategic advantage for the country.
By rehabilitating and upgrading its own national rail system, Zimbabwe could connect with this modern infrastructure, significantly enhancing efficiency and cost-effectiveness for exporting coal and other minerals.
The Government has previously attempted to secure partnerships with international companies to modernise the NRZ infrastructure.
Despite expressions of interest from several contenders, including a joint venture involving Transnet and Diaspora Infrastructure Development Group that offered a potential investment of US$400 million in August 2017, no concrete agreements have materialised.
In 2023, the NRZ transported 2,2 million tonnes of freight, primarily high-value minerals like lithium and ferrochrome, due to their more favourable export economics compared to coal. This year, the freight volumes are expected to increase by 17 percent, NRZ spokesperson Mr Andrew Kanambura said recently
Despite the increase, the 2,7 million tonnes target remains a far cry from the NRZ’s past performance. In its prime, the parastatal routinely handled 18 million tonnes of freight annually, and had a workforce of 20 000.
Despite successful trial shipment of 20 000 tonnes of coal to China’s cement industry in November 2022, high transportation costs continue to hinder largescale exports.
While the Zimbabwe Coal Producers Association (ZCPA) reported strong demand from China and Europe, at least in the short to medium terms, the markets remain out of reach due to the logistical challenges posed by the country’s ailing railway system. The coal for the trial shipment was transported through the Mozambican port of Beira.
The ZCPA has previously said the limited capacity of NRZ, coupled with high rail costs, was making exports of the commodity unviable.
Some coal mining companies are now forced to scale back production due to lack of viable export options.
Last week, Hwange Colliery Company Limited said it was considering stopping underground mining for the next six months to stop losing mined coal through spontaneous combustion “as production is way more than sales”.
“The quantity of mined coal is deemed sufficient to meet the operating needs of the company,” Hwange administrator Mr Munashe Shava said in the company’s trading update for the third quarter ended September 30, 2023.
He said the decision came after the company stockpiled a significant amount of coal, with sales failing to keep pace with the recent surge in production.
Similarly, many mining companies are burdened with stockpiles of coal and coking coal that they cannot offload due to limited absorption by local and regional markets.