World copper excess stocks threaten local mines revival

16 Jun, 2023 - 00:06 0 Views
World copper excess stocks threaten local mines revival The International Copper Study Group (ICSG) released its latest quarterly bulletin, revealing that the global refined copper market experienced a 332 000-tonne surplus in the first quarter of 2023

eBusiness Weekly

Tapiwanashe Mangwiro

Zimbabwe has been looking to revive its closed copper mines since 2022 due to favourable mineral prices, but the current events in the copper industry might derail or delay those plans as prices are facing huge downward pressures.

Mines and Mining Development Minister, Winston Chitando said that the Government’s mining investment arm, Zimbabwe Mining Development Corporation, has been seeking some US$500 million to revive the country’s three copper mines and restart output and capitalize on the recent price boom.

Restarting copper-mining is in line with the government’s latest National Development Strategy (NDS1), whereby the Government aims to boost mineral exports to US$12 billion by 2023 and to US$20 billion by 2030, up from US$3,2 billion in 2020.

Currently, gold, platinum, ferro-alloys and nickel constitute the majority of Zimbabwe’s mineral exports comprising some 68 percent of the total value of exports in 2022, but the government aims to increase production of other commodities, including copper.

Copper is a workhorse metal in the global economy given its high ductility, conductivity, and corrosion-resistant properties. Today, clean energy initiatives are catalysts that could lead to higher secular demand.

However, the plans might be slowed by the relative downward pressure on copper prices being driven by excess supply as a result of lower global economic growth.

The International Copper Study Group (ICSG) released its latest quarterly bulletin, revealing that the global refined copper market experienced a 332 000-tonne surplus in the first quarter of 2023. This marks a significant increase from the 8,000-tonne surplus recorded in the same period last year.

This surplus can be attributed to a rise in refined copper production, which outpaced demand, causing prices to fall.

In its latest report the S&P500 said, “We have downgraded our London Metals Exchange 3-month (LME 3M) average copper price forecast for the June quarter to US$8 614 per tonne following the recent price correction, although we have upgraded our September-quarter forecast to US$8 743 per tonne.

Our LME 3M copper price forecast for full year 2023 has been downgraded to US$8 785 per tonne from US$8 830 per tonne.”

Mining expert Engineer Emmanuel Nhende said that copper mining in Zimbabwe is still a long way out as very few new investments are going into the sector.

He continued, “The ZMDC said it needs US$500 million to revive all its copper mines and I do not see them doing it especially with the recent and more lucrative lithium rush we are in. We are most likely to see more investment into that sector and the Chinese who use 56 percent of world copper are also investing more in lithium than copper in the country.”

Adding to the sentiment was Engineer Takudzwa Muzangwa who said the copper market is currently not lucrative and for the country to revive the mines they would have to get a long term investor.

“With the current market sentiment, the local mines will have to be revived using internal funds and at a pace that will be looking at 4-5 years from now and not an immediate return as there might be lower returns on investment than spreading it to quick yields and future ones,” he said.

During this week, copper continued the broader downward trend after peaking in early January this year, with the latest movement reflecting bearish market sentiment.

Mining expert Chiedza Makwindi said, “Disappointing Chinese import data and slowing export figures, added to the slow price growth expected in the world’s second largest economy. Many had hoped that the Chinese reopening would be a boon for global markets as pent up demand was thought to have fostered a more optimistic outlook for global trade.

“However, mixed data has revealed that the reopening momentum appears to be experiencing challenges as even China is not immune to the growth slowdown experienced in much of the developed world.”

Even in the midst of such pressure, Muzangwa believes that the green revolution will continue to push copper prices up in the long term as much as countries begin to recover economically.

He alluded, “Energy storage may prove to be one of the most copper-intensive markets in the 21st century. The rapid, large-scale deployment of these technologies globally, electric vehicle fleets particularly, will generate a huge surge in copper demand.”

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