A steel plant planned to be set up in the western Mozambican province of Tete will cost about 950 million US dollars and will be able to produce 1.5 million tonnes of steel a year, according to Industry and Trade Minister Max Tonela.

He said this at a meeting hereMonday to present the results of the feasibility study for the project developed by the British company Baobab Resources. The project also includes the construction of a coal-fired power station capable of generating 250 megawatts (MW) of electricity.

It is envisaged that by the third year of operation, the project should be employing around 2,580 workers, 85 per cent of them Mozambican.

Tonela said the project had been under study for the past decade and that Baobab and its partners had already invested more than 50 million US dollars on research and studies.

Baobab is in partnership with the International Finance Corporation (IFC), an affiliate of the World Bank Group, and main technological partner Metallurgical Corporation of China International (MCCI) in developing the project.

Tonela said that because of the enormous potential of the steel project, and the large number of business opportunities which could spring up around it, the government recently approved the creation of the Rovubue Industrial Free Zone, covering 4,456 hectares in Moatize and Chiuta districts.

On its website, Baobab Resources says that the Tete project “is ideally positioned at the confluence of all iron and steel-making raw materials of iron ore, coal, power and water”.

“By leveraging the project’s unique access to these resources, Baobab intends to establish a vertically integrated mining and steel-making operation, producing steel products to supply the industrial, commercial and urban growth in Mozambique, as well as regional end-markets,” the company says.

“Explosive regional growth underpins a sustained and rapidly expanding demand for steel. Currently Mozambique consumes approximately 400,000 tonnes of steel per year, which translates to less than 15 kilogrammes per person per year.

“Consumption is expected to double within the next decade, but even at double the per capita consumption, Mozambique will be a long way behind the curve in comparison to its regional peers, underlining the long-term growth potential not just in Mozambique, but in the neighbouring southern African region.”