eBusiness Weekly
Economy Uncensored with Tapiwanashe Mangwiro
In the past week the Ministry of Finance and Economic Development and the Reserve Bank of Zimbabwe put through their mid-term fiscal review and monetary policy statements respectively in which they all agreed that pressures on metals have caused a fall in export receipts.
In his mid-term fiscal review, Mthuli said; “The country’s merchandise exports slightly weakened by 1,9 percent to US$2,59 billion during the first five months to May 2023, weighed down by declining exports for PGMs and gold. To year end, merchandise exports are envisaged to grow by 3,5 percent in 2023.”
His counterpart the RBZ Governor Dr John Mangudya said; “Merchandise exports are envisaged to close the year at US$7,1 billion, a 1,7 percent increase from US$7 billion in 2022, driven by surging gold, lithium, diamond and tobacco exports notwithstanding subdued PGMs exports as their prices remain depressed.”
Mineral export revenue for 2023
Platinum export revenue for the five months to May 2023 was down US$13,1 million to US$61,9 million as prices are 16,22 percent down in the year to date, but 4 percent higher than the same period last year.
Nickel and nickel mattes have also seen a decline in export revenue in the year to May, as compared to the same period in 2022. Nickel export revenue in the first five months of last year topped US$415,5 million but has come off US$67,7 million this year to US$347,8 million.
Nickel mattes have been one of the country’s top export earners in the past three years and by May 2022, it had generated US$488,7 million, but 12 months later it had generated US$426 million.
However, not all is gloom as tobacco which surpassed the 260 million kilogramme target set for this selling season, has been doing well on the export front. Export revenue from tobacco to May 2023 topped US$340 million, a positive US$24,2 million variance from the same period last year.
2023 Full year metals forecast
Chrome
Metals.com predicted a drop in prices as it said;, “We expect the second half of 2023 to be softer on a weaker market outlook. Downward pressure on chrome ore prices, which have started coming down, is expected to translate to lower ferrochrome prices. Given the forecast inflationary pressures, our margins are at risk of being squeezed in H2 2023.”
The FerroChrome market is expected to register fluctuating growth trends in the long term, while inflation and supply chain concerns are expected to continue in 2023.
Platinum
The platinum price has faced an arduous battle in 2023, witnessing a decline of approximately 12 percent year to date.
The platinum market has experienced a decline in price in 2023 due to concerns about economic downturn and slower growth in China.
Platinum price started in 2023 at US$1,086, today, platinum traded at US$956.40, so the price decreased by 12 percent from the beginning of the year. The forecasted platinum price at the end of 2023 is US$994 and the year to year change -8 percent.
Lithium
After reaching new heights in 2022, lithium prices have cooled off in 2023.
Lithium carbonate prices sank to below US$35 099,81 per tonne this month, the lowest in nearly three months, amid compounding signs of low demand for key battery manufacturers. Battery manufacturers for new energy vehicles muted buying activity since the start of the third quarter as their input inventories filled up and funds from previous Government-led subsidies dried.
The concerning macroeconomic backdrop in the Chinese economy also reflected low consumer spending for electric automobiles.
Lithium is expected to trade at US$34 277 per tonne by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations.
Gold
In the first half of the year, gold increased by 5,4 percent in USD closing June at US$1 912,25/oz. Gold outperformed all other major assets apart from developed market stocks
Gold price started in 2023 at US$1 830,10 and today, gold traded at US$1 925,90, so the price increased by 5 percent from the beginning of the year.
The forecasted gold price at the end of 2023 is $1 989 and the year to year change 9 percent.
Verdict
Zimbabwe still has a high dependency on exports of unprocessed or semi-processed mineral products, which results in the country being a price taker.
The decline in commodity prices such as being experienced negatively affects revenue which ultimately impacts on government planning.
However, it is common knowledge that the prices of value added metal products such as jewellery, electronic products, etc. seldom fall in response to the drop in the prices of gold, platinum or related metals from which the products are made.
Trade theory argues that with time the price of primary commodities will decrease in relation to that of manufactured goods, resulting in countries specialising in primary commodity exports experiencing a detrimental economic effect.
The fact that 60 percent of world trade is in intermediate products strengthens the case for value addition and beneficiation in Zimbabwe, hence the need to move away from export of raw and semi-processed minerals.
Most developed countries have managed to acquire significant benefits through local beneficiation and value addition of minerals, even when they do not possess natural resources.
Countries like Belgium, Israel, Japan, South Africa and the United States of America have developed sophisticated industries that conduct manufacturing value addition for minerals they import from foreign countries.
Hence mineral beneficiation and value addition will increase minerals’ contribution to growth and development, and ultimately lead to poverty reduction which is rampant in Zimbabwe.
So, conclusively as a country we need to quicken our value addition drive in order to reduce the dependency syndrome on world market prices and also cover the gap between imports and exports.
Tapiwanashe Mangwiro is a resident economist with the Business Weekly and writes this in his own capacity. @willoe_tee on twitter and Tapiwanashe Willoe Mangwiro on LinkedIn
