Algeria’s $10bn iron project will catalyse local industry

7 September 2023

 

Progress on the project to develop the Gara Djebilet iron ore mine in Algeria’s western Tindouf province, as well as the development of related steel-making infrastructure, is expected to significantly boost the country’s economy.

The Gara Djebilet mine was commissioned in July 2022 with plans to produce 2 million tonnes a year (t/y) by 2026.

Officials have said they want to boost this to 50 million tonnes of iron ore annually by 2040.

It is expected that boosting production at the facility could require between $7bn and $10bn in investment.

Gara Djebilet is understood to hold the world’s largest iron ore reserves, with an estimated 3.5 billion tonnes at the location, of which around 1.7 billion tonnes are available for exploitation.

Low-cost steel

The mine is expected to bolster Algeria’s steel industry by reducing the need for iron imports. In 2022, Algeria imported iron ore worth $1.2bn.

By 2025, the project is expected to provide raw materials worth $2bn, boosting Algeria’s self-sufficiency in the iron and steel sector.

Low-cost steel could also help support the country’s expanding automotive sector, which uses steel to produce parts.

In March, the carmaker Stellantis announced plans to spend more than €200m ($213m) to manufacture several Fiat models in Algeria.

The plans involve the construction of a new plant, which it says will create nearly 2,000 local jobs and will have a production capacity of 90,000 vehicles a year by 2026.

Chinese partnership

In June, the Chinese consortium CMH and the Algerian state-owned steelmaker Feraal signed a partnership agreement to develop the Gara Djebilet mine and develop facilities to process the ore.

Under the terms of the agreement, two joint venture companies will be created.

One will focus on the Gara Djebilet mine development, and the other on a complex that will transform the iron ore into metal slabs.

Most of the workforce employed in extracting iron ore from the mine is expected to be Algerian since Feraal already has trained workers familiar with the extraction process.

The processing facility will require specialist knowledge that is less common among Algeria’s workforce. It is expected that a Chinese crew will initially be used and, over time, these individuals will pass on their skills to Algerian workers.

Iron ore processing

The planned facility for processing iron ore will be able to produce 500,000 t/y of iron ore concentrate.

It is expected to have a budget of between $120m and $150m.

A memorandum of understanding (MoU) relating to the processing facility was signed by Feraal and the Algerian steel producer Tosyali Algeria, a subsidiary of the Turkish Tosyali Holding, in April this year.

Under the terms of the agreement, the two companies will form a joint venture to develop the iron ore processing, which they intend to bring online within 24 months.

Transport links

On 6 September, Algeria announced that it was partnering with China to construct 6,000 kilometres of rail lines. President Abdelmadjid Tebboune says this move will help spur economic development across the country.

Priority will be given to implementing the 280km-long project to transport phosphate to Annaba port and the more-than-800km-long iron ore transport line to link the Gara Djebilet mine with Bechar.

The details of the financing arrangements for these projects should be scrutinised

If the iron ore mine and related projects go ahead as planned, the potential synergies are significant and could buoy productivity in the North African country.

However, successful outcomes for Algeria are not guaranteed, and the details of the financing arrangements for these projects should be scrutinised.

All of the latest major project partnerships with China were announced after 5 December 2022, when Algeria signed an executive plan with China for the “enhancement of cooperation within the framework of the Belt and Road initiative”, which Algeria joined in 2018.

The Belt and Road Initiative is China’s global infrastructure development strategy, which was launched in 2013 and has provided financing for major projects across the Asia Pacific, Africa and Central and Eastern Europe.

Key focuses of the initiative are infrastructure investment, construction materials, railways, automobiles, iron and steel.

The initiative has provided significant benefits in some countries, but in others it has led to problematic debts, with some major projects failing.

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Wil Crisp
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