Alcan Signs for Coega Smelter in a Spate of South African Infrastructure Projects

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas). After years of stop and go, the Alcan aluminum smelter at Coega on the east coast of South Africa is on the way. The company has signed a $100 million contract with a joint venture consisting of SNC-Lavalin (OTC:SNCAF) (Montreal, Quebec), Hatch (Pittsburgh, Pennsylvania) and Murray & Roberts (Johannesburg, South Africa) for the front end engineering design (FEED) and management of the first phase of the 360,000 tons per annum (tpa) smelter. The FEED is expected to take nine months to complete and will provide firm cost estimates and a critical path for construction, pending the Notice to Proceed from the Coega Aluminum joint venture board. The second phase of the project, which would bring aluminum production capacity to 720.000 tpa is also currently under development. The smelter will use the latest version of Alcan’s AP3X series smelting technology.

Current estimates for the total project stand at $2.7 billion. The Industrial Development Corporation of South Africa (IDC) will take a 15% stake in the project and 5% is being reserved for Broad Based Economic Empowerment (BBEE). Alcan is also in discussion with additional potential partners. In November 2006, Alcan signed a long-term energy agreement for a guaranteed power supply from a 2,400 MW power station for the smelter with South Africa’s power utility Eskom.

The Coega (pronounced ‘Koogah’) special economic development zone and Ngqura port are the elements in a major greenfield industrial enterprise just north of the Indian Ocean coastal city of Port Elizabeth. The national rail utility Spoornet will spend $228 million over the next four years to build rail lines between Coega and the new Lephalale coal mines in the far northwest of the country. $115 million will be invested in a rail line between Lephalale and the Richards Bay Coal Terminal on the northeastern coast. The new mega 4,200 MW power plant at Lephalale will use a major portion of the mines output.

This investment will be in addition to the $5 billion budgeted for 332 new locomotives, wagons and signal systems over the next five years. A further $ 117 million will go to connecting Coega with the national rail system at Port Elizabeth. The major chrome ore shipping facility, currently operating in the harbor to the north of the seafront at Port Elizabeth, will be moved to Ngqura which is also planned to be a major container trans-shipment port. Parts of the existing rail line between Johannesburg and Port Elizabeth will be electrified.

In a massive program of freight infrastructure improvement over $700 million will be invested in coal export rail lines to increase Richard Bay throughput to 84 million TPA and $570 million will be spent on improvements to the Sishen-Saldanha Bay iron ore export line. Spoornet is targeting 30% of national freight in the next five years after falling to 10% in the face of road freight competition.

The signing of the Alcan contract, although criticized in some quarters as a flag waving indulgence to export ‘congealed electricity’ when the country is suffering power shortages, is something of a talisman for the pent up get-up-and–go South Africa’s next wave of development has needed. Coupled with the iconic visions surrounding the hosting of the World Soccer Cup in 2010 and the building of the Gautrain express system between Johannesburg, Pretoria and the country’s major airport plus solid consumer confidence, a spate of new infrastructure projects might just release enough energy, growth and human resource to tackle the poverty and its accompanying social threats which stand in stark contrast to the golden delights of the country from the Limpopo to the Cape.

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