Report backs cement firms’ outcry on coal

Wednesday December 07 2016
pic report back cement

The Minister of Energy and Minerals, Prof Sospeter Muhongo, said recently that the ban would not be lifted because there is “enough good quality coal” in the country.

Dar es Salaam. A government-commissioned report has confirmed what cement manufacturers have been complaining about for a number of years – that the quality of locally produced coal is questionable.

The report, seen by The Citizen, was compiled between August and September 2015 by a five-member independent committee chaired by Dr Augustine Hangi.

The Commissioner of Minerals tasked the team with establishing why major coal users in the country, especially cement manufacturers, prefer imported to local coal.

The team was also asked to identify challenges faced by local producers, particularly with regard to their capacity to produce and transport coal to customers and suggest how to make coal produced in the country competitive in terms of quality and price.

The government earlier this year banned the importation of coal.

The Minister of Energy and Minerals, Prof Sospeter Muhongo, said recently that the ban would not be lifted because there is “enough good quality coal” in the country.

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The move has been criticised by cement manufacturers and the quality of locally produced coal has come under scrutiny since the Mtwara-based Dangote cement factory suspended production last month.

The report was compiled three months before the plant was commissioned and earmarked as a potential large-scale buyer of coal produced in the country.

The report lists major challenges cement manufacturers have been grappling with in recent years.

They include poor and/or fluctuating quality of coal, damage to kilns and a decrease in overall productivity.

According to the report, Tancoal, the only active coal producer in the country, “has no coal processing plant which will produce coal of consistent quality demanded by the market. To date Tancoal has been practising selective mining which does not guarantee consistency in quality”.

“Tancoal should install a coal preparation/washing plant in order to reduce pyritic sulphur content, stabilize calorific value and ash content and control size distribution.”

After coal is mined in Ngaka it is transported to a place known as Kitai, where there is a storage area with a holding capacity of 165,000 tonnes, but the coal is left exposed to the elements, thus compromising its quality.

“Rain water normally increases moisture content in coal, which is not acceptable to customers if it exceeds eight per cent,” says the report.

“Tancoal should construct a shade at Kitai coal stockpile yard and transportation trucks from Kitai to all consumers should be properly covered with tarpaulins to prevent an increase in the moisture content.”

Another challenge is unreliable supply of coal in terms of timely delivery at Kitai due to frequent breakdowns at the mine and problems with the transportation system.

The report further says that the actual demand for coal in Tanzania and Kenya at that time (September 2015) was about 51,600 tonnes per month, which exceeds Tancoal’s current production capacity of between 30,000 and 35,000 tonnes per month.

“Demand for coal in the near future is forecasted to increase in view of a projected expansion of Tanga Cement, Mbeya Cement and inception of Dangote Industry whose total demand is estimated at 25,000 tonnes per month,” the reports says, and suggests that Tancoal improve the availability of mining machinery and equipment.

Another challenge is the high price of locally produced coal when transport costs are factored in, making imported coal up to 25 per cent cheaper.

At the time of the study, a tonne of locally mined coal was sold at $43 and it cost between $80 to $100 to transport it to Dar es Salaam or Tanga. This made it more expensive than coal imported from South Africa.

The Minister of Industry, Trade and Investment, Mr Charles Mwijage, said last week that the government had already reduced the price of a tonne of coal to $39, and that the total cost until it reaches the Dangote plant was $90 compare with $103 for a tonne of the commodity from South Africa.

Manufacturers also complained before the committee about the loss of revenue due to their being required to buy coal with US dollars, while the cement they produced was sold in Tanzanian shillings. They said the value of the local currency has been “constantly falling”.

Reached for comment yesterday, Prof Muhongo said the report was obsolete, adding that times have changed since it was compiled.

“The report is obsolete as it has been overtaken by events. We are now vigorously campaigning for foreign investors to use local resources instead of importing raw materials...this is aimed at creating jobs for our people,” he said.

The report advises the government to promote the use of domestic coal as a source of energy among cement producers in the country to save foreign exchange and create employment.

“However, when coal producers are not able to meet the required demand in terms of quantity, quality and price, importation of coal is imperative for the survival of the industries in the country,” the report warns.

Additional reporting by Ludger Kasumuni