Mozambqiue aluminium sector
The Aluminum Sector in Mozambique
Mozambique's aluminum sector is a cornerstone of its economy, significantly contributing to both exports and industrial output. Dominated by the Mozal aluminum smelter, which ranks among the largest private-sector projects in the country, this analysis offers insights into the sector's location, key players, and relevant factors influencing its performance.
Location
The aluminum sector is primarily centered around the Mozal aluminum smelter, located in the Beluluane Industrial Park, approximately 20 kilometers west of Maputo, the capital city. This strategic positioning provides crucial advantages for the sector. The smelter's proximity to the Port of Matola facilitates exports with a dedicated berth specifically constructed for aluminum shipments. Additionally, its location near Maputo ensures easy access to urban infrastructure and logistics networks, essential for importing alumina, the raw material used in aluminum production, as well as exporting finished aluminum products.
The Mozal project includes extensive infrastructure, such as access roads, a bridge, and port facilities developed as part of the initial USD 2 billion investment in the late 1990s. While the majority of alumina is imported, there is a smaller bauxite mine operated by E.C. Meikles (Pty.) Ltd. located in Manica Province, central Mozambique. Mozambique's lengthy 1,600-mile coastline along the Indian Ocean and its proximity to South Africa further enhance its export capabilities, making the Maputo region ideal for aluminum production and trade.
Economic Contribution
The aluminum sector has a significant impact on Mozambique's economy. In 2023, the value of aluminum exports reached approximately USD 1.28 billion, marking a decrease from USD 1.477 billion in 2022. This decline can be attributed to fluctuations in global prices. Notably, aluminum accounted for 57% of total exports in 2006, though its share has diminished as other sectors, particularly natural gas, have expanded.
Through its operations, Mozal contributes prominently to the manufacturing sector, which made up 14% of GDP in 2004, with Mozal alone representing half of this output. Additionally, Mozambique benefits from export agreements under the Southern African Development Community (SADC) and the Economic Partnership Agreement (EPA) with the European Union, allowing tariff-free access to important markets.
Production and Capacity
Mozal's production output was reported at 564,000 tonnes in 2006, an increase from 555,000 tonnes in 2005, with a rated capacity of 506,000 tonnes per annum (tpa). Plans for an expansion known as Mozal 3 aimed to add another 250,000 tpa by 2009; however, these plans have not been realized due to challenges related to power supply.
Mozambique holds the distinction of being Africa's second-largest aluminum producer, trailing only South Africa, and contributed around 2% of global aluminum output in 2006.
Challenges and Risks
Despite its strengths, the aluminum sector in Mozambique faces several challenges. The heavy reliance of Mozal on hydroelectric power—which accounts for 45% of the national electricity supply—renders it vulnerable to supply disruptions. This dependency has been highlighted by delays associated with the Mozal 3 expansion project.
Global market volatility poses another risk, as evidenced by a decline in aluminum exports from USD 1.477 billion in 2022 to USD 1.068 billion in 2023 due to lower global prices. Additionally, the local value addition is limited; most aluminum is exported as primary ingots, with only 9% processed locally by Midal Cables, hindering job creation and economic diversification.
Environmental and social concerns also loom large. While Mozal's construction displaced local farmers and compensation and relocation measures were taken, the smelter's high energy consumption raises questions about the sustainability of its operations. Furthermore, while Maputo is relatively stable, broader challenges such as inadequate infrastructure and security issues in regions like Cabo Delgado could indirectly affect investor confidence.
Summary
The aluminum sector in Mozambique is a vital segment of the national economy, characterized by its strategic location and significant contributions to exports and GDP. While the sector is poised for growth, it must contend with challenges such as power dependence, global market fluctuations, and the need for local value addition. Addressing these challenges through strategic investments and sustainable practices will be essential for ensuring the long-term viability and success of Mozambique's aluminum industry.
Key Players
The aluminum sector is highly concentrated, with Mozal and its stakeholders dominating production and export activities. Key players include:
Overview: Mozal is the largest aluminum producer in Mozambique and the second-largest in Africa (after South Africa), with an annual production capacity of approximately 580,000 tonnes of primary aluminum, exclusively for export.
History: Commissioned in 2000 with a capacity of 250,000 tonnes per annum (tpa), Mozal expanded through the Mozal II project (2003–2004), doubling its output. It remains the flagship foreign investment in Mozambique, initiated to rebuild the economy post-civil war.
Operations: Mozal uses alumina imported from Western Australia, processed with hydroelectric power from Mozambique's grid (consuming 45% of the country's electricity). Approximately 9% of its output is sold to Midal Cables, a downstream manufacturer in Mozambique, with the rest exported.
Economic Impact: Mozal accounts for about 30% of Mozambique's official exports and roughly half of the manufacturing sector's output, though its employment impact is modest due to automation.
Role: South32, an Australian mining company, is the majority shareholder in Mozal, holding a 63.7% stake after acquiring an additional 25% from Mitsubishi's MCA Metals in 2021.
Contribution: South32 integrates Mozal into its global supply chain, using alumina from its Worsley Alumina refinery in Australia. It has invested in energy-efficient technologies (e.g., AP3XLE) to enhance competitiveness and reduce emissions, aligning with global sustainability trends.
Strategic Focus: South32 aims to leverage Mozal's access to hydroelectric power and European export markets, positioning it as a key asset in the transition to low-carbon metals.
Other Shareholders:
Mitsubishi Corporation (MCA Metals Holding GmbH): Holds a 25% stake, providing financial and operational support.
Industrial Development Corporation (IDC) of South Africa: Owns 24%, reflecting regional investment in Mozambique's industrial growth.
Government of Mozambique: Holds a 3.9% stake through preference shares, ensuring state involvement in this critical sector.
Role: Operates a small bauxite mine in Manica Province, with output increasing by 26% in 2006 and projected to rise further. This mine supports minor domestic bauxite production, though it is not directly linked to Mozal's operations.
Role: A downstream buyer of Mozal's aluminum, Midal Cables manufactures aluminum cables in Mozambique, receiving 50,000 tonnes annually under a 2013 agreement. It adds value by processing aluminum locally, though its scale is limited.