Cedro to invest R$1.8bn in Serra Azul railroad

Brazil could have its first short-line railroad, which is common in countries like the United States to handle specific products and where there is no major rail line. The project was submitted two months ago to ANTT, the sector’s regulator, under the new rules for railways in the country.

Minas Gerais-based group Cedro Participações, led by businessman Lucas Kallas, is in charge of the project. Cedro is awaiting approval from the agency to begin all the procedures to make the construction work viable, such as obtaining environmental permits and presenting the project to potential users and also to the communities in the region.

“This is an emblematic investment for iron ore mining in Minas Gerais. It brings social and environmental benefits to the region where it will be built, as well as lower freight costs for future users,” Mr. Kallas told Valor.

The businessman, who is also active in the iron mining sector in other parts of the state, began designing the “small railway” project a year ago, based on the situation of freight transport by road in the region. According to Mr. Kallas, the investment budget for the project, excluding rolling stock (locomotives and freight cars), totals R$1.8 billion.

The short line, called the Serra Azul branch, will connect to MRS Logística’s lines to the ports of Rio de Janeiro and São Paulo. The line is 32.4 kilometers long and connects the municipalities of Itaúna and São Joaquim das Bicas, crossing the mountainous complex of the Serra Azul region, in the so-called Iron Quadrangle.

Five iron ore producers operate in the region through which the branch line will pass. Currently, these companies use road trailers to transport their production to shipping yards along the MRS line and from there to ports in the state of Rio de Janeiro.

With a capacity of 25 million tonnes per year, the Serra Azul branch line will provide an alternative means of transporting ore from these mining companies: Ipê, ArcelorMittal Mineração, Musa, Comisa, and Minerita. “There are 2,500 trucks per day on the region’s highways, mainly the BR-381, loaded with 37,000 kilos, causing accidents, wear and tear on the roads, and higher freight costs than the railroad will offer,” said Mr. Kallas.

The project includes 1.6-meter track gauge, the same as the MRS. There will be five trains of 132 freight cars each. Each car can carry 100 tonnes. According to Cedro, each train accounts for 471 trucks. The construction period, once approved by all parties involved, will be 24 months.

From an environmental point of view, according to Mr. Kallas and José Carlos Martins, a mining consultant at Cedro Participações, the short line has an advantage over road transport in terms of greenhouse gas (GHG) emissions. According to the company’s studies, the average transport distance will be reduced to 30 km from 50 km. “Since the railroad emits one-third of what trucks do, the combined effect could reduce CO2 emissions by up to 50,000 tonnes per year. That’s more than 70% of current emissions,” said Mr. Martins.

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