By Business Reporter – 20 December 2018
HARARE (Mining Index) – GOVERNMENT has been urged to prioritise large-scale extraction of the 45 billion tonnes of iron ore reserves in Chivhu as global steel demand growth is slowing dramatically, which will potentially reduce steel usage and demand in years to come.
This was said by Eddie Cross, an economic analyst during the first devolution conference held in Harare today.
“The problem is the steel industry is in decline globally. So there is a limited window in which we can beneficiate that resource and make money from it. And if we don’t start soon, and on a very large scale, ultimately in the long term, steel is not going to play a very significant role in national development anywhere in the world.”
The long-term decrease in overall steel intensity is moving fast due to material substitution, shifts in design parameters and steelmakers’ own success in producing lighter and stronger steel.
In October this year, Mines and Mining Development Minister Winston Chitando said government granted a Chinese firm Tsingshan, a special grant to iron ore mining rights in Chivhu, to establish a stainless steel manufacturing plant.
China is the world’s largest producer and consumer of steel, with approximately 10 times the steelmaking capacity of the United States. In 2017, China cut overcapacity in the steel sector by shutting down 50 million tonnes for domestic environmental and economic reasons. It however produced 831 million metric tons of crude steel while the US produced 116 tonnes in the same year.
In October last year, Reserve Bank governor John Mangudya said it was sad to note that Zimbabwe was spending US$400 million on steel imports annually.
Iron ore, a key ingredient in the manufacture of steel, has high demand in the US and Germany, who are leaders of steel importers on the global market.
Chivhu iron ore deposits have been ranked the biggest, unexploited iron ore deposit in the world, estimated to be worth trillions.
“When Essar started negotiations with government, it was US$150 a tonne, so 45 billion tonnes in the raw form, in the ground, that when we beneficiate, we are talking of much more money. You are talking trillions,” said Cross.
Cross added that Indian investors, Essar Africa Holdings Limited (EAHL), which is the third largest steel company in the world wanted to invest US$7 billion in the Chivhu iron ore project, but the negotiations with government were fruitless.
In 2017, India produced 101.4 tonnes, and was the third largest producer after China and Japan.
Tsingshan was set to make an investment of over US$1 billion, projected to generate annual export revenue of US$2 billion per annum. ENDS//