Steel and mining giant ArcelorMittal is betting that it has won a secretive political fight over a port concession in Liberia after green-lighting a long-delayed iron ore expansion.
The company is going ahead with $800m plans to complete a mining and transshipment project that has been stalled for years.
Shipment through new facilities at Buchanan would bring ArcelorMittal Liberia's exports of sinter fines (an iron ore product) to 15m tonnes per year, up from current shipments of 5m tonnes. The new volumes would start in late 2023.
Brokers speculated that Chinese buyers could target the new volume in their drive to diversify from Australian iron ore. They expect such a cargo to travel mostly in panamax and kamsarmax bulkers. It would fill about 190 vessels a year.
The Phase 2 project will serve Luxembourg-headquartered ArcelorMittal’s open-pit mines in the Nimba range on Liberia’s north-eastern border. It includes a company-developed rail line and power grid, as well as new port facilities at Buchanan.
Tonne-mile demand
The Nimba mines are in the same region as another even larger but less advanced iron ore project. The Simandou mines in Guinea are being developed by Rio Tinto and China’s Chinalco. But a rights dispute with Brazil’s Vale involving corruption allegations still hangs over the stalled Simandou project, according to recent financial reporting by Vale.
Such West African projects have drawn attention for their potential effect on total dry bulk demand because of the tonne miles they would add to the shipping equation.
The Liberian expansion project, first planned in 2013, was stalled by the West African Ebola outbreak in 2014, and then again in 2019 by a concession dispute with Bulgaria’s Prista Oil Holding.
The dispute culminated in September 2019, when the government of Liberian President George Weah and the National Port Authority granted a 25-year concession to Prista Oil Holding subsidiary Prista Port Buchanan.
'Have a good day'
ArcelorMittal protested that Liberia was awarding the same rights twice. The Prista project “includes and overlaps a majority of the current concession area of ArcelorMittal Liberia in Buchanan”, ArcelorMittal Liberia chief executive Scott Lowe wrote in a letter to government officials that was published in West African media.
Control of Prista Port Buchanan was purportedly transferred in 2020 to a group of US stockholders, including controversial distressed debt financier Jay Alexander Johnston and his Bulgarian-linked Dalmatian Capital Management.
The Liberian port project lists its chairman and contact person as Kyle Anderson, a tax accountant based in the Minneapolis suburbs in the midwestern US.
“I’m not really interested in speaking to a reporter,” Anderson said when contacted by TradeWinds. “Have a good day.”
Optimism on timing and costs
ArcelorMittal has not commented on the dispute in its financial reports, although the Liberia expansion is its largest ongoing capital expenditure project in terms of new capacity.
Bloomberg reported in January that the company was discussing the future of its Liberian investment with the government in light of the dispute. But in its 2020 annual report released this month, ArcelorMittal has switched the project status from “under review” to “forecast completion”.
It expressed an optimistic outlook on timing and costs because most procurement and construction for the mine, concentrator, rail and port project was done before it went on hold.
“The capital expenditures required to conclude the project are expected to total approximately $0.8bn as the project is effectively a brownfield opportunity given that 85% of the procurement has already been done (with the equipment on site) and 60% of the civil construction complete,” ArcelorMittal disclosed in its annual report.
The first shipments are expected to begin in the fourth quarter of 2023.
Before ArcelorMittal began its interrupted Phase 2 expansion, the Buchanan port had been regarded as a demurrage trap. Commercial shipping sources described it as having a single supramax loading berth for dry bulk cargoes, with fully laden departures possible only at high tide and shipments often delayed for moisture reasons.
