Dry Bulk in Africa Through the Eyes of an African Shipping Line
With Africa increasingly exploiting its vast mineral resources, its demand for carriage of dry bulk commodities is on the rise. From rich deposits of iron ore in West Africa to coal in the Southern African region, the heterogenous mineral distribution across Africa gives it a unique potential. Africa also has in abundance critical elements such as lithium, cobalt and nickel, whose demand is rising to support manufacturing of today’s clean energy technologies.
However, these commodities have to be moved from mines to their destination markets, mainly in China and India. Unfortunately, the capacity of road, rail and port infrastructure in some parts of Africa is a major impediment for exports. This, coupled with a dearth of African shipping lines, has made the situation dire.
This is the gap that Arise Shipping and Logistics company hopes to fix. As a Pan-African shipping line, Arise Shipping is working to fulfill new demand for integrated maritime and logistics services for mining and industrial clients operating in Africa. It is now a year since Arise Shipping launched.
To give an update on the progress of the past year, Arise Shipping CEO Cpt. Pappu Sastry sat down with TME African Correspondent Brian Gicheru. Below is their conversation.
What has been your progress so far in the past year working in the African shipping sector?
Well, it is good to note that as a maritime professional I have been working in Africa for over a decade. In this regard, the African shipping sector is a familiar market. However, during the period some political changes have happened in key growth areas of bulk commodities, specifically the coups in parts of West Africa.
A good thing I have noticed though is the growth in logistics of critical commodities such as lithium. Interestingly, it has happened in countries we did not expect. When we started, we mainly focused in the logistics of bauxite and iron ore in Guinea (Conakry) and Sierra Leone. But now we have seen a shift and ended up having long-term contracts for lithium logistics in Madagascar. We are now looking for such long-term contracts in countries such as Namibia and South Africa.
In terms of volume, which commodities are likely to dominate bulk shipping in Africa?
In the last year, we have been exporting iron ore and bauxite, mainly from West Africa. Looking at the trends, for the last seven years the growth of the African bulk commodities has been represented by bauxite, mainly in Guinea. Production of bauxite from Guinea has risen from 15 million tons (mt) annually to the current 115 mt. This growth is likely to continue.
There are also new iron ore exploration projects coming up. Therefore, iron ore and bauxite will remain as the key bulk commodities out of Africa. On the other hand, coal in the southern African region is experiencing some decline and this is unlikely to change in the coming future.
With vast supplies of lithium, Africa is likely to become a major global supplier of the commodity as demand rises. Tell us more about the experience of your company in moving lithium out of Africa?
Indeed, there has been a gold rush for lithium in Africa for the past few years. This is because lithium exploration projects in other continents such as South America have failed to reach production. However, due to the high value of lithium, it will be easier to ship it via containers rather than as a bulk commodity. Hence, lithium trade in Africa is a boon for container shipping.
The main market for the African lithium is China, partly because the Chinese have invested significantly in lithium mines in Africa. India is also coming up as another destination market.
Poor hinterland and ports infrastructure in Africa is a major obstacle for logistics and maritime companies. At Arise Shipping and Logistics, how have you navigated this to effectively serve your clients?
Since we mainly serve clients in the mining sector, lack of publicly funded infrastructure tends to limit the number of players operating in the continent. As for the major mining corporations, some have opted for private stand-alone roads, railways and even ports to move commodities, something that is common in a country such as Guinea. This means smaller mining corporations find it hard to compete.
The way to change this is for governments to invest heavily in public infrastructure to guarantee access for all players. The impact of poor infrastructure has also meant commodities exported out of Africa have higher landing costs in the destination markets.
When you launched last year, you mentioned Arise Shipping intends to expand to other sectors besides bulk shipping. Has this been possible?
Apart from bulk we are also into container shipping, but we rely on the existing carriers for exports. We are also doing land logistics, especially for our clients in lithium mining. In fact, this is an exciting challenge for us, partly because land logistics in Africa could cost more than ocean freight. Ideally, this presents us with an opportunity to help in streamlining land logistics.
As a Pan- African shipping line, Arise Shipping and Logistics is a trailblazer for other African companies with an interest to invest in the shipping sector. What is needed for Africa to have more dedicated shipping lines?
Access to funding is a major factor, without which investors do not find the need to enter the sector. In addition, there is not much of intra- African trading with AfCFTA relatively new. In essence, most of the imports come from abroad. It is therefore important for African nations to have dialogues with their neighbors to spur intra-African trading.
On the upside, the entry barrier to the African shipping market is low without regulations such as cabotage rules. This means a company could start small even with a single vessel. However, governments ought to provide incentives for African shipping lines such as port access and tax guarantees.
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