How North African railway is on track to helping China de-risk its iron ore supply

China currently depends largely on Australia and Brazil for its iron ore, the primary raw material for making steel. Beijing is hoping supply from the Gara Djebilet mine, which has reserves of around 3.5 billion tonnes, will help diversify its sources.

Meanwhile, Algiers is banking on the ore to help reduce its dependence on its oil and gas industries for export revenues.

CRCC will work with Algerian state-owned civil engineering company Cosider Travaux Publics to deliver the railroad, which will connect the remote parts of the mineral-rich western region of Gara Djebilet Iron Mine Zone with the Dumiat Industrial Zone in the Bechar region, with a total of 40 stations along the way. In doing so, it will facilitate the development of Algerian iron ore mining and provide a much-needed boost to the economy.

A lack of rail connections has thus far prevented Algeria from developing its large iron ore deposits in the southwest. Photo: Weibo

The Chinese company is well-practised in desert construction. It previously assisted in the construction of parts of Algeria’s 1,216km East-West Highway – built over the course of 16 years “under the most complex geological conditions”, according to Beijing.

The Gara Djebilet project is part of China’s “railway diplomacy” that will see the construction of 6,000km of tracks across the North African country.

It is also part of 19 cooperation deals worth US$36 billion that Algerian President Abdelmadjid Tebboune and Chinese President Xi Jinping signed in Beijing in July last year.

“Strengthening the railway sector is the best guarantee for development and our Chinese friends have agreed to this project, which will cover about 6,000km,” Tebboune said during his visit to China.

Algerian MP Mohamed Machkak, of the Transport Commission, told Chinese-owned CGTN Africa – the African division of the China Global Television Network – that the new railway project will connect isolated regions, creating thousands of direct and indirect jobs for Algerian youths.

“It will raise standards of living and create economic opportunities for individuals and communities,” Machkak said.

According to Yahia Zoubir, a non-resident senior fellow at the Middle East Council on Global Affairs in Qatari capital Doha, the Gara Djebilet mine in the southwest, phosphates projects in the east, as well as other minerals, will help Algeria reduce its decades-long dependence on oil.

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Zoubir said in the early 1970s, the iron ore mines of Gara Djebilet were going to be developed in collaboration with Morocco, under the leadership of then-president of Algeria Houari Boumediene.

Inspiration had been taken from the cooperation of France and West Germany in the 1950s with the formation of the European Community of Steel and Coal, which ultimately led to the creation of the European Union. But a dispute over a region of the Western Sahara in the 1970s saw the Algeria-Morocco deal fall through.

“The tense relations between Algeria and Morocco put an end to the Gara Djebilet cooperation project,” Zoubir said.

He said the existing infrastructure had become obsolete and the need for an easy way to transport the iron ore across the desert prompted the Algerian government to ask China for help, due to their other successful projects in the country, such as water pipelines, highways and tunnels.

“Undoubtedly, this project is important for Algeria but also for China since the spillover of such a project, once implemented, would be emulated in the sub-Saharan region and in the Mediterranean Basin,” Zoubir said.

It will also give China access to another source of iron ore, something it desperately wants, said Lina Benabdallah, an associate professor in the politics and international affairs department at Wake Forest University in the US.

She said once the Gara Djebilet mine is developed, it is expected to yield an initial production capacity of 2 million to 3 million tonnes per year.

The railway from Bechar to Tindouf is critical for the transport of ore concentrate, she said, both for local and international markets.

“This project is interesting to the Algerian government for the potential for income diversification and economic growth,” Benabdallah said.

“And for China, increasing options for where to source iron ore is critical to avoid depending on a limited number of providers and the price or access volatility that can come with that.”

She said Algeria and China have a strong diplomatic bond, with the countries elevating their relationship to comprehensive strategic partnership in 2014 – the highest designation under China’s bilateral relations.

“This signals both to the fact [that] China and Algeria have enjoyed very strong relations since the 1950s and Algeria’s anti-colonial war, and also the continuous strength of the diplomatic ties over the decades,” Benabdallah said.

Steven Jackson, a professor of political science and fellow at Washington’s Wilson Centre, agreed that the main thing China gets out of the Algeria deal is a diversification of its iron ore sources.

He said China is the top steel producer in the world, making over 1 billion tonnes of steel in 2022 – significantly more than the rest of the world combined. But China imports most of its iron ore and 70 per cent of that ore comes from one country: Australia.

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“China-Australian relations have been strained in recent years and China’s leaders would probably want to diversify its sources,” Jackson said.

If that relationship was to worsen in the near future, he said other iron ore sources would be imperative.

Jackson noted that in 2017, Chinese steelmakers and Algerian officials signed a memorandum of understanding (MOU) to explore the idea of exporting ore from the Gara Djebilet mine, but that at the time it was found to be both a logistical challenge, with the railway needed, and a technical challenge, because of phosphorus in the ore, which weakens the steel.

“The Chinese may have found a way to make it viable,” Jackson said.

On the economic relationship front, he said China is now Algeria’s biggest source of imports – at 17 per cent in 2022 and growing. Meanwhile, France’s market share has been shrinking; it was number one in 2010, but is now a distant second, with about 10 per cent of the Algerian market, according to Jackson.

He said China exported nearly US$7 billion of goods to Algeria in 2022. However Algerian exports back to China were less than US$2 billion that year.

“There is a significant trade imbalance, and the leaders in Algiers would like to export more to China. Algeria would also like to see more Chinese investment in Algeria,” Jackson said.

South China Morning Post