Opportunities for China and India to invest in Africa’s heavy haul railways


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Dirk Kotze, Director and General Manager: Africa, from The Beijing Axis has presented at the Heavy Haul Rail Africa. If you would like more information about the conference, please visit the website: www.railconferences.com/heavyhaulrail/africa

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Opportunities for China and India to invest in Africa’s heavy haul railways

  1. 1. The Beijing Axis⎥ 1DisclaimerThis document is issued by The Beijing Axis. While all reasonable care has been taken in the preparation of thisdocument, no responsibility or liability is accepted for errors or omissions of fact or for any opinions expressedherein. Opinions, projections and estimates are subject to change without notice. This document is forinformation purposes only, and solely for private circulation. The information contained here has been compiledfrom sources believed to be reliable. While every effort has been made to ensure that the information is correctand that the views are accurate, The Beijing Axis cannot be held responsible for any loss, irrespective of how itmay arise. In addition, this document does not constitute any offer, recommendation or solicitation to any personto enter into any transaction or to adopt any investment strategy, nor does it constitute any prediction of likelyfuture movements or events in any form. Some investments discussed here may not be suitable for allinvestors. Past performance is not necessarily indicative of future performance; the value, price or income frominvestments may fall as well as rise. The Beijing Axis, and/or a connected company may have a position in anyof the investments mentioned in this document. All concerned are advised to form their own independentjudgement with respect to any matter contained in this document.
  2. 2. The Beijing Axis⎥ 2The Beijing Axis’ Knowledge & Network SynergiesBeijing AxisCommodities•  Commodity Marketing• Commodity ProcurementBeijing AxisCapital•  Transaction Origination• Corporate FinanceAdvisoryBeijing AxisProcurement• ComprehensiveProcurement SolutionsBeijing AxisStrategy• Strategy Formulation• Strategy Implementation  Founded in 2002; has successfully worked with many international and Chinese MNCs  Operates in four synergistic cross-border China businesses  Provides services across various sectors, with a core focus on the MINING, RESOURCES, INDUSTRIAL ENGINEERING andOTHER SERVICES sectors  Provides solutions to international firms as they act in unfamiliar territory in China/Asia  Provides solutions to Chinese/Asian firms as they venture out and ‘go global’
  3. 3. The Beijing Axis⎥ 3The Beijing Axis⎥ 3Agenda1. Background to Chinese Rail Projects in Africa2. The Chinese Rail Industry3. Challenges4. A Note on India in Africa
  4. 4. The Beijing Axis⎥ 4China’s Share of Global GDP and Consumption of Selected Commodities (% 1990, 2000, 2010)China has dramatically increased its share of world consumption of key metalsand minerals over the past two decades. The drivers of this trend remain intact4% 17%41%0%50%100%1990 2000 2010ROW China14% 18%45%0%50%100%1990 2000 2010ROW China7% 22%47%0%50%100%1990 2000 2010ROW ChinaPrimary Aluminium Steel Coal2% 4% 10%0%50%100%1990 2000 2010ROW ChinaGDP4% 13%32%0%50%100%1990 2000 2010ROW* ChinaRefined Nickel13% 17%33%0%50%100%1990 2000 2010ROW China4% 12%38%0%50%100%1990 2000 2010ROW ChinaChrome Ore Refined Copper8% 20%41%0%50%100%1990 2000 2010ROW ChinaRefined Zinc*Note: ROW stands for Rest of WorldSource: World Bank; CNBS; CEIC; The Beijing Axis Analysis
  5. 5. The Beijing Axis⎥ 5China’s steel consumption is poised for more moderate but sustainedgrowth and the base effect mattersSteel Intensity Comparison of Top 30 Economies(1) and Other Selected Asian Economies (2010)*Note: (1)Switzerland, Norway and Sweden are not included for comparison purposes(2) China in the year 2000Source: IMF; World Steel Association; The Beijing Axis Analysis02004006008001,0001,2000 10,000 20,000 30,000 40,000 50,000 60,000Steel Consumption Per Capita(USD, 2010)GDP Per Capita (USD, 2010) Emerging Economies except China Mainland China Developed EconomiesBubble Size: GDP CAGR(2000-2010)RussiaBrazilSouth AfricaJapanUSGermanyFranceUKItalySpainMexicoAustraliaSweden NetherlandsCanadaAustriaBelgiumSaudi ArabiaIndiaIndonesiaIranThailandChinaPolandArgentinaVenezuelaWith less infrastructureconstruction, developedeconomies have lower demandfor finished steelThe trend line is indicative of the general pattern in steel consumption at different stages ofindustrialisationSteel consumption declinesafter GDP per capitareaches USD 25,000Developing economiesconsume less steel percapita, but their relativelylarge populations ensureyears of steady demandgrowthMalaysiaPhilippinesVietnamS. KoreaTurkeyChina(2) China in 2000
  6. 6. 35.12005 2006 2007 2008 2009 2010 2011USD1bn
  7. 7. China’s imports of selected commodities from Africa (USD bn, 1995-2008)CAGR 1995-20080%20%40%60%80%100%0% 20% 40% 60% 80% 100% 120% 140%China’s imports from Africa as a % of total importsCobaltFerroalloysNickelPetroleum GasesElectronicsSteelPlatinumCrude OilCopperChromiumManganeseDiamondsIron OreWoodTobaccoCotton- High growth rate- Low quantity- High growth rate- High quantityNote: Bubble size is based on the commodity’s share of China total commodity imports from Africa in 2008Source: UN Statistical Database; The Beijing Axis Analysis
  8. 8. China37%Italy15%France10%USA8%Turkey5%All Others25%Share of all contract revenue in Africa (2009)Middle East16.6%North America0.4%Africa41.1%Europe3.2%Asia36.0%South America2.7%Breakdown of China’s international contractrevenue (2009)Source: ENR; The Beijing Axis Analysis
  9. 9. The Beijing Axis⎥ 9The Beijing Axis⎥ 9Agenda1. Background to Chinese Rail Projects in Africa2. The Chinese Rail Industry3. Challenges4. A Note on India in Africa
  10. 10. THE CHINESE PARTS AND EQUIPMENT MARKETThe railway industry can be divided into 3 sub-sectors: Infrastructure,Vehicle/Components and ServicesABC-ZhuzhouJinxiCCCCAngangAlstom-CSRC,Siemens -CSRCABC - DatonBeichuangZhongtieWuhanNanruiDatongQiqihaerNafangBeiyaShentongChina RailwayConstructionBaotouChina RailwayCommunicationTaiyuanTaiyuanChina SouthernRailwayChina SouthernRailwayShidaiTielongGuangshenChina RailwayEngineeringPanzhihuaChina RailwaySignal & CommMaanshanJinxiChina NorthernRailwayChina NorthernRailwayZhuzhouChina RailwayMaterial SupplyDaqinConstructionTracksSignal/PowerWheelsAxlesLocomotivesCoach/WagonComponentsLogisticsOperatorsInfrastructureVehicles/ComponentsServices
  11. 11. TonkoliliCCCC – EPCM ContractorSISG – Off-takeCRM – Related infrastructureKaliaCIF - Funding, 100% off-takeCREC - Feasibility studyCCCC - Feasibility studyWestern ClusterShougang SteelBongChina UnionCDBPutuMt Nimba LiberiaSimandouChalcoPossibly BaosteelSimandou 1-2 & SouthMt Nimba Cote d’IvoireMt GinkaMarampaMCC, SISGAcquisitionMt Nimba GuineaGuineaS. LeoneLiberiaCote d’IvoireClose to infrastructure thatexists or could be rehabilitatedFar from infrastructureSource: RBC, Company Reports, Reuters, The Beijing Axis Analysis
  12. 12. KangoBelingaCMECConstruction& off-takeEXIM BankFinancingNkoutCRCCRelated railMt AvimaZanagaMbalamSichuan Hanlong GroupEquity stakeCHEC, CRCC-CACRail feasibility studyNabebaCHEC, CRCC-CACDeepwater port, rail& rolling stockTopaMayokoCARCameroonGabon Congo-BClose to infrastructure thatexists or could be rehabilitatedFar from infrastructureSource: RBC, Company Reports, Reuters, The Beijing Axis Analysis
  13. 13. The Beijing Axis⎥ 13The Beijing Axis⎥ 13Agenda1. Background to Chinese Rail Projects in Africa2. The Chinese Rail Industry3. Challenges4. A Note on India in Africa
  14. 14. 14Political:  Chinese commodity demand  Availability of cheap credit  Risk appetite  Options outside Africa
  15. 15. 15Operational:  Cost projections  Local content and labour requirementsCommercial:  Competition from the rest of the world amidst weak growth in developed countries  Changing of the projects landscape in Africa
  16. 16. The Beijing Axis⎥ 16The Beijing Axis⎥ 16Agenda1. Background to Chinese Rail Projects in Africa2. The Chinese Rail Industry3. Challenges4. A Note on India in Africa
  17. 17. -17-Exploration blocksTwo biggest marketsExploration blocksZain footprint Exploration blocks Exploration blocks Zain footprint
  18. 18. -18-Zain footprint50% stake in KenyaPetroleum Refineries,operating an80,000bpd refinery inMombasaZain footprintExploration blocksCoal ConcessionsExploration blocksService centre inSouth AfricaControlling stakein Zimbabwe Iron& Steel Company(ZISCO)Large subsidiaryExploration blocks
  19. 19. www.thebeijingaxis.comCOPYRIGHT© The Beijing Axis Ltd. 2012. No part of this publication may be reproduced ortransmitted in any form or by any means without prior written consent of The Beijing Axis. It is basedon material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, wecant offer any warranty that it contains no factual errors. We would like to be told of any such errors inorder to correct them.THANK YOU!Dirk KotzeDirector & General Manager AfricaE-mail: dirk@thebeijingaxis.com