The Tanzanian coal trade was primarily regional, as the country traded coal to its neighboring countries. Now there is a global demand for the country’s thermal coal.
This rise in demand is a result of the ongoing war between Russia and Ukraine. Europe which is typically dependent on Russia for its thermal coal and natural gas has had to look elsewhere for this pollutant energy source.
According to the Brussels-based think-tank Bruegel, Russia typically supplies about 70% and 40% of the bloc's natural gas. The war has affected this supply chain, prompting an energy crisis all across Europe.
The continent while in search of alternatives stumbled across the Tanzanian port of Mtwara which mainly dealt in cashew nuts until late last year.
The current energy gap has created a window of opportunity for African coal-producing nations. South Africa’s coal exports rose 11 folds in the months following the war, according to a report by Reuters. Botswana has also projected growth in its coal market that would last into next year.
Tanzania’s Mining Commission told Reuters that coal exports are projected to double this year to around 696,773 tonnes, while production is expected to increase by 50% to about 1,364,707 tonnes.
The government is considering building a railway that would link the coal-producing Ruvuma region to Mtwara, according to the acting executive secretary of the Mining Commission, Yahya Semamba.
Tanzania-based miner Ruvuma Coal has so far, exported at least 400,000 tonnes of coal via a trader to countries including the Netherlands, France, and India since November, as per trade data reviewed by Reuters.
Since November when Mtwara launched its first ever coal shipment, up to 13 vessels of coal have been loaded up. According to a port official; a bulk carrier with a 34,529-tonne capacity, docked last week, loaded up, and set out for France.
The demand for coal and the introduction of the European buyers has doubled profit margins for coal miners in Africa as Europeans are willing to pay twice the price quoted by Asian buyers.
President of Cargill's ocean transportation division, Jan Dieleman, noted; "Europe is competing with other buyers and the alternative is more expensive, which is gas. Europe should be able to source coal and we will see very strong flows into Europe from Colombia, South Africa and even further away."
It is interesting to note that a lot of these European nations have temporarily set aside their sustainability goals, and opted for a more frowned upon source of energy. Germany is delaying planned shutdowns of some coal plants in order to ensure the security of power supply.
"Strong incentives have pushed coal and lignite generation 25% above year-ago levels, despite a whole host of plant closures over the past three years," an analyst at Bank of America said about Europe.
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