Belief in the feasibility of such an undertaking is largely based on the fact that Mozambique has large reserves of natural gas, which is used in the iron ore reduction process.
To discuss the results of the preliminary viability study, Mozambican and South African delegations, led by their respective Ministers of Industry, met in South Africa on Saturday.
Citing the viability study, Mozambique's National Director of Industry, Sergio Macamo, said the conditions exist to build such a factory. because Mozambique has sufficient natural gas, water, and electricity, while South Africa has an abundance of iron ore.
The ore is magnetite piled up, as a by-product of copper mining, in Phalaborwa.
Macamo added that another encouraging factor is that the prices and demand for both iron and steel have improved on the international market. The main buyers are Asian countries, notably China.
The document says that ore can be transported from Phalaborwa by railway, by a slurry pipeline, or a combination of both.
Macamo said that the two delegations agreed to a further meeting within a month after internal consultations in their respective countries. If everything goes as planned, the full viability study will be conducted between January and June 2008, and Macamo was optimistic that the first steel slabs could be produced in early 2011.
This project is not at all new, but is simply an updating of MISP (Maputo Iron and Steel Project). This was the plan to build a factory making steel slabs in Maputo, which would be the anchor project for using the natural gas from the Pande and Temane fields in the southern province of Inhambane.
But the project was proposed by the American energy trader Enron.
When Enron went spectacularly bankrupt, and turned out to be more of a criminal conspiracy than a bona fide company, the plans for MISP went on the back burner - though the Mozambican government always said it hoped other investors would take up the project.
ENRON had estimated that the project would have the capacity to export about two million tonnes of steel a year. But it was never able to answer several key questions.
First, such a plant requires enormous quantities of water as a coolant, and southern Mozambique is short of water. The government made it very clear that MISP could not use the Umbeluzi river, which supplies Maputo with its drinking water.
Building a pipeline to carry water from the Incomati is a possibility - but that river is considerably further away, and sometimes runs very low in the dry season. Desalination was ruled out as too expensive.
A further difficulty is that a slurry pipeline would have to cross South Africa's Kruger National Park, where any spills could be extremely damaging.
SOURCE: AIM
