copper

Trade Winds bimonthly update volume 44

NUMSA strike to go ahead, At a CCMA facilitated Dispute between NUMSA and other unions earlier this week, NUMSA exercised its right to call for the issuing of a certificate of non-resolution.

With NUMSA having declared it’s dispute against all the employer organisations on the 29 July, and SEIFSA and the Associations having countered with its dispute against NUMSA on 2 August, NUMSA is within its right to call for the certificate.

We will monitor the situation and circulate any information received but the feeling is that we must prepare for the worst-case scenario.

Some striking has been noted at various steel merchants around Johannesburg which in turn will lead to some disruptions in steel supply.

Border updates, Beitbridge is once again the centre of attention as delays continue, this time with various contributing factors. SARS’s systems have gone down.

Trade flows through the routinely congested transit have been a nightmare of late, with processing delays on the Zimbabwean side of the crossing slowing traffic to a trickle.

Now, with SARS also experiencing issues, the queue south of the border is expected to worsen and transporters are advised to make the necessary preparations for a long wait.

The question also remains as to why trucks working the north-south line through the Southern African Development Community should be checked and charged by Zimbabwean authorities as often as they are at the two primary transits on this route – Beitbridge down south and Chirundu in the north.

At the Limpopo River crossing, alleged over-inspection is resulting in a queue stretching for kilometres south of the border, although processing is affected because of physical constraints caused by construction work, it still doesn’t explain why the Vehicle Inspection Department is inspecting cargo already weighed immediately south of the border.

Transport carrying SA’s GDP, South Africa’s transport sector grew 6.9% in the year’s second quarter, becoming the biggest sector to add to the 1.2% economic expansion announced earlier this month by Statistics South Africa.

The mining sector, sustained by a growing demand for raw minerals by global manufacturers, grew 4%.

The South African economy recorded its fourth consecutive quarter of growth, expanding by 1.2% in the second quarter of 2021.

The economic impact of the wave of severe economic disruption, protest action and violence in KwaZulu-Natal and Gauteng, which took place in July, will only reflect in the third quarter GDP results, due for release in December.

Solar Power to reduce reliance on Eskom, The generation of solar power by top-performing gold mining company Pan African Resources is expected to lower reliance on power utility Eskom by up to 30%.

Pan African’s focus is to function off the national electricity grid during daytime hours at the moment as power storage options appeared to be very expensive at the moment.

The group’s focus now is solar and making sure it works. Ten megawatts will be the first plant and by early next year it would have proven itself.

Pan African produced 12.4% more gold over the last 12 months and reported a 36% increase in operating profit to $128 million.

Container rates continue to soar, container rates have more than quadrupled since the beginning of this year as shippers across the globe drive prices to levels well beyond the previous peak recorded 16 years ago.

The peak from 2005 is a whopping 128% lower than the level to which the current rates have increased.

To make matters worse for freight forwarders battling to keep up, the 128% increase is expected to curve upwards into 2022.

There is some hope as some freight liners such as CMA CGM have announced that freight rates will be paused till early next year as well as German shipping major Hapag-Lloyd confirmed that it had put a hold on freight rate increases on certain routes and would continue to do so for the time being.

Port congestion and severe capacity shortfalls have put shipping lines in the driver’s seat as rates skyrocketed. However, with lines under increasing pressure from shippers and regulators, perhaps this is the start of a cooling of rate rises.

Copper and Iron Ore prices drop, Iron ore price fell on Thursday after China reported a drop in the country’s steel production in August. The price of the commodity dropped by 7%.

China’s production was in excess of 83 million tonnes of crude steel in August, a 13% drop from the same period a year ago which is the lowest recorded level since March 2020. China’s efforts to cut emissions is the leading cause in the drop.

The price of copper is another commodity that felt a price drop as China has decided to release copper, aluminium and zinc from its state reserves, in an effort to overcome the gap between supply and demand.

China, being the world’s number one metal’s consumer had released 420,000 tonnes of the metals so far this year through batches where the public could bid on prices that sat slightly lower than the market value.

Copper was trading around $9,438 per tonne on Thursday.

The market now awaits the expected tapering of stimulus in next week’s US Federal Reserve meeting.

Zambian government to restore sanity, Zambia’s newly appointed mines minister, Paul Kabuswe, said on Tuesday that government will ensure that there is stability and predictability in the mining sector as well as calming any fears of mining royalties being increased.

Zambia, being Africa’s second-largest copper producer, which defaulted on its sovereign debt last year, has benefited from an increase in copper prices to record highs.

Zambia’s policy on Mopani Copper Mines KCM, two critical operations will be overseen by new President Mr. Hichilema. Zambia took on $1.5 billion in debt to buy Mopani from Glencore in January this year and they are still seeking a new investor for it. The previous administration was looking for an investor to fund the mine’s expansion, which they are hoping would boost output from 34,000 tonnes of copper a year to 150,000 tonnes.

President Hichilema’s market-friendly stance will hopefully attract new investment into Zambia’s mining sector which in turn will help boost the country’s copper production at a favourable time whilst copper nears record-highs.

Zimbabwe seeking investors, Zimbabwe will seek to raise $200 million in a debut domestic U.S. dollar bond sale on its stock exchange in Victoria Falls that trades exclusively in foreign currency, according to Finance Minister Mthuli Ncube.

Earlier this month, Bloomberg reported that the bond sale would be for $100 million. In August, Ncube said a debt offering could help meet the cost of a $3.5 billion compensation bill the country is facing after it reached an agreement with White farmers evicted from their land two decades ago.

The so-called “Zimbabwe Global Investor Roadshow” has seen Ncube travel to South Africa and Dubai to court foreign investment. In New York, Ncube will also meet with officials from the International Monetary Fund and the World Bank, ahead of an IMF visit to Zimbabwe that’s expected next month.

Zim looking for additional power to ease 12-hour cuts, Zimbabwe is looking to Mozambique and Zambia to supply it with more electricity as it tries to fill a power shortfall that’s led to 12 hour power cuts.

Government is currently in discussion with Mozambique trying to secure an additional 180 megawatts from their newly commissioned power plants as well as attaining an extra 100 megawatts from Zambia.

The current electricity cuts are due to rehabilitation work at the Kariba South hydropower plant, constraints at its coal-fired Hwange plant as well as limited power imports, according to the Zimbabwe Electricity Supply Authority.

On a lighter note; a Zimbabwean artist has brought new life to obsolete Mugabe-era banknotes and turned them into striking paintings.  A 100 trillion Zimbabwe dollar has finally found value thanks to the artistic talent of Prudence Chimutuwah.  Prudence explained that she wants people to heal from the damage caused during the days of hyper-inflation and see the bank notes in a new joyful light!  Her figures are mainly painted in blue, which she described as “a symbol of strength and dominance”.

Happy weekend ahead!

Upcoming Public Holidays:
24th September 2021 – Heritage Day (RSA)

“Life is like riding a bicycle. To keep your balance, you must keep moving.”

Trade Winds bimonthly update volume 43

Bulls are on the rampage, in the aluminium market!  The Shanghai Futures Exchange contract paved the way and rocketed to a 13 year high on Monday.

The London Metal Exchange followed shortly thereafter hitting its own 10 year high of $2726.50 per tonne on Tuesday.

The driver of the rally stems in China’s own supply chain problems with energy restrictions thereby reducing smelter output.  Shanghai exchange inventory has fallen from more than 392,000 tonnes in April to a current 248,926 tonnes and the world’s largest producer continues to absorb aluminium from the rest of the world.  China imported 1.06 million tonnes of primary metal last year and another 744,000 tonnes in the first half of 2021 and there are no signs that anything is slower down anytime soon!

The copper price has fallen slightly on the back of slower factory activity in China but the outlook into next year sees the price remain in the $9,000 average.

Iron ore prices plunged due to production curbs in China on Wednesday and the expectation is for further price drops for the remainder of the year. Baoshan Iron and Steel Company, one of the largest listed producers in China predicts further decreases this year.

International supply constraints remain, the end of the current “norm” seems to be but a dream, with constant uncertainty surrounding pricing and delivery; projects, quotes and contracts are being heavily affected.

Supply of material remains inconsistent with delivery times often pushed out on a weekly basis, mill-rollings are frequently being pushed back by at least 3 months.

Steel prices are somewhat levelling out however HDPE and rubber prices are on the rise with back-to-back increases, the international petrol price is a big contributor as the price of fuel affects the raw material directly whilst some force majeure conditions and material allocations remain in place as well, resin producers have implemented increases for the last two months with some already nominating for a further increase at the end of September.

Resin production has returned for the most part, and can even be considered robust, however, after fulfilling contracts, producers are holding back resin to rebuild inventories, leaving little resin available for spot sales.

Numsa begins demonstrations, The National Union of Metalworkers of South Africa has started with nationwide demonstrations, while wage negotiations with the Steel and Engineering Industries Federation of Southern Africa are ongoing.

It is noted that the nationwide demonstrations, so far, are peaceful demonstrations and not picketing which may only be embarked on in support of a protected strike or in opposition to a lock-out, but neither parties have served strike or lock-out notices on the other.

Negotiations are ongoing after Seifsa’s wage offer in July was accepted by other trade unions but Numsa shortly after declared a deadlock with the federation. 

Border updates, it has been over a week since cargo processing issues at the Beitbridge Border Post resulted in truck queues stretching south for kilometres, the situation seems nowhere near being resolved.

Drivers have been advised to stock up on supplies such as food and water in Musina as the queue was at least 11 kilometres long and going nowhere slowly.

It is said that dawn-to-dusk operating hours by clearing agents north of the border had resulted in delays south of Beitbridge, adding to the backlog were Zimbabwean drivers who are allowed three days to transit through their country compared to counterparts from neighbouring states who aren’t.

The dawn-to-dusk and transit time issues are relatively new, a third obstacle at Beitbridge has been in the mix for years, a weighbridge for northbound traffic that’s situated on the other side of the N1 where trucks going north have to cross over into the oncoming lane for this inspection, geographical and space constraints are the reason behind this procedure which makes matters worse, at the Vehicle Inspection Department on the Zim side, all northbound trucks have to be weighed again, causing traffic to back up over the bridge and blocking the movement of traffic going into the truck park immediately south of the Limpopo River crossing.

In addition, construction work north of the border is constraining facilities, impacting on the manoeuvrability of truck traffic.

The Kazungula One-stop Border Post bridge across the Zambezi River is not yet operating at the desired speed expected of a modern multimodal transit.

More than three months after the opening of the bridge, the streamlining system that is in place is still reporting processing times in excess of 30 hours, given existing cross-border challenges, such as unaligned Covid-testing measures delaying truckers at various transits, transporters were hoping that teething issues at Kazungula would soon be sorted out and that hopes of a true one stop border post could be in place.

Keep expectations low on cargo delivery, latest maritime consultancy findings are showing that carriers are no less reliable, but they’re also no better.

The Global Liner Performance report, which includes figures up to and including July, reveals that reliability has been hovering around 35%-40% for most of the year.

In July it dropped by -3.8 percentage points month-on-month, on a year-on-year level it was down a massive -39.7 percentage points. The average delay for late vessel arrivals continued to deteriorate. The level of delays this year has been the highest across each month compared to previous years.

Maersk Line was the most reliable carrier in July (47.3%) followed by Hamburg Süd, the only other carrier with a figure higher than 40% whilst Evergreen was the least reliable, coming in at 16.2%.

None of the carriers recorded a month-on-month improvement.

Fuel hike again, despite expectations of a price drop, the price of unleaded and lead-replacement petrol increased by 4 cents per litre this past Wednesday.

However, diesel prices will go down by 15 cents per litre for 0.05% sulphur and 14 cents per litre for 0.005% sulphur.

There is also the implementation of a slate levy, with an increase of 8 cents per litre implemented in the price structures of petrol and diesel. The slate levy is a mechanism implemented to finance under-recovery by the South African petroleum industry. 

Whilst there is a slight relief in a diesel decrease, the effects will be null and void coming of the back of the huge increase last month, freight has been directly affected as running costs have increased as well as the petrol price increases directly affecting Rubber and PVC prices.

Zimbabwe to use IMF aid to boost currency, Zimbabwe will use more than half of the $961 million allocated by IMF in the form of special drawing rights to support its struggling currency. 

The government abandoned a 1:1 ratio between a precursor of the reintroduced Zimbabwe dollar and the U.S. dollar in February 2019. The currency now trades at 85.82 to the U.S. dollar and even lower on the black market.

The IMF injected a record $650 billion of reserve assets to build confidence and stability in the global economy in the wake of the devastation caused by the pandemic. The reserves are allocated to all fund members, with an estimated 70% going to the Group of 20 largest economies and just 3% to low-income nations. 

Zimbabwe won’t use any of its reserves to pay towards the $8 billion in external debt it owes, even though its arrears have effectively blocked it from borrowing more money from multilateral lenders.

Hippo Valley Estates, is planning a US$40 million cane development project and has already cleared half of the 4-000 hectares designated land secured for the project.  It is a partnership between Government and local banks and the hope is to boost the current sugar output of 400 000 tonnes per year significantly.

Zambia plans to reboot economy, after years of mismanagement and defaulting on international debt loans, Zambia is looking at turning its finances and fortunes around following the inauguration of a new president Hakainde Hichilema on August 24.

One of the first major steps by the newly elected president, was the appointment of fellow economist Situmbeka Musokotwane as the new cabinet’s minister of finance.

Sworn in on Friday last week, Musokotwane, in much the same vein as President Hichilema, got right down to business by announcing that copper production would be a primary objective of the new government as it strives to double the production of the raw metal by 2026 and if successful, will see Zambia’s copper output increase to two million metric tonnes in five years’ time.

The precious metal accounts for roughly 70% of Zambia’s revenue from export earnings however under former president Edgar Lungu, a wedge was driven between the previous government’s relations with the mining industry, causing exports to dwindle while government debt ballooned due to unchecked infrastructural expansion projects.  It was reported on BBC news 1st September that President Hichilema is horrified at the empty treasury he has inherited and was quoted as saying the hole is much bigger than expected but remains determined to change things around and create a corrupt free and freshly energized country.

The immediate changes by Hichilema resulted in the kwacha and government bonds surging to record highs as the international business community had a more positive outlook on Zambia.

The best way to dig Zambia out of its debt hole was to fill it with copper, said Musokotwane.

Mozambique’s Cabo Delgado returns to normal, over a thousand people in Mozambique’s Cabo Delgado region who had been displaced by insurgency, have successfully returned to their homes. Local refugees have been moved from the Quitunda camp and are now back in Palma to rebuild their lives.

The insurgents operated from the north in a town called Mfundi which had a gas plant, Rwandan forces moved to Palma and went on to Quitunga until they captured the stronghold, Mocimbia de Praia, which was the main city where operations were being planned by IS.

Once the Rwandan forces had secured the central and northern axis of the insurgent operations, they began reclaiming the villages in the joint operation with Mozambican troops.

Focus now is on moving people out of the displacement camps back into their homes.

A Defence Force spokesperson says it’s still too early to tell when they will be able to pull out of Mozambique because while there have been small victories, the instability persists in other parts of the region.

Spring is in the air! We would like to wish all our customers a happy spring day for earlier this week!

 “It is spring again. The Earth is like a child that knows poems”

Trade Winds bimonthly update volume 42

Zambia elects a new president, President Elect Mr Hichilema defeated main rival President Edgar Lungu, by almost a million votes.

This was President Elect Mr Hichilema’s sixth attempt at winning the presidency and his official inauguration is on Tuesday 24th August at National Heroes Stadium.

H.H. has already refused the expensive Lexus presidential vehicle and continues to drive around in his Nissan Infinite living his message to the people of Zambia, that all Zambians matter and the presidency is not about self-glorification; it is to serve and make Zambians proud again!  Already he has met with the Director Generals of the Financial Intelligence Centre, Anti-Corruption Commission and Drug Enforcement Commission to ensure Zambia moves in the right direction free of political interference, corruption and with proper accountability.

Our congratulations go out to all people of Zambia for demonstrating the power of true democracy and we look forward to witnessing a very positive term in office for HH that will bring upliftment, prosperity and pride to all Zambians.

Zambian Copper producers standing by to start expansion projects worth $2 billion once industry has reached an agreement with HH on royalties which has been on hold since 2019 when tax changes were implemented.  Specifically mining royalty taxes were increased to 5.5-10%  from 4-6% and was not deductible from Corporate Income Tax.

NUMSA picketing “premature” The National Union of Metalworkers of South Africa has served notice that it intends to start picketing following failed wage negotiations with the Steel and Engineering Industries Federation of Southern Africa (SEIFSA).

The federation says it views this notice as “premature” in that picketing may only be embarked on in support of a protected strike or in opposition to a lock-out. 

To date, SEIFSA reports, neither party or parties have served strike and/or lock-out action on the other and negotiations aimed at breaking the deadlock are ongoing.

The federation advisedthat it is has various meetings with all the trade unions this week and next week, under the supervision of the Bargaining Council.

SEIFSA first made a wage offer at the Bargaining Council late last month, during which other unions indicated a willingness to accept the offer. The federation suggested that workers receive a 4.4% increase this year, a consumer price inflation plus 0.5% increase in 2022 and a 1% increase in 2023.

SEIFSA says centralised collective bargaining is more necessary than ever before to ensure the survival and recovery of the industry.

NUMSA believes the special phase-in dispensation, which introduces a new entry rate ranging between R20 and R29 an hour, will allow employers who have not been paying the minimum rate of R49 an hour to continue doing so for 15 years.

We wait to see the outcome of these talks and can only hope that all parties come to an agreement as the industry and the country itself cannot afford such a catastrophic event.

Border updates, The Democratic Republic of Congo has doubled back on proposed legislation designed to prevent foreign-registered transporters from carrying DRC minerals out of the country.

A declaration signed on July 29 by the minister of transport and ways of communication announced plans to restrict the carriage of export minerals solely to vehicles registered in the DRC which was due to come into force on the day.

However, in an about-turn, DRC President Félix Tshisekedi has asked the minister to revisit the legislation in light of its anti-competitive nature.

While investigations are under way, the legislation is not going ahead and will most likely be overturned, currently foreign transporters can still pick up loads.

These include the provisions of the COMESA treaty, which calls for the promotion of competition, the elimination of measures that stand in the way of the free movement of people and goods and the reduction of non-physical barriers, particularly legal and regulatory ones.

Transnet recovery on track, Transnet Port Terminals’ recovery plan is making good progress after the cyberattack last month that paralysed its Navis cargo processing system, bringing the utility’s ports and railways network to a complete standstill.

Customer interfaces had largely returned to normal.

Looking into the recovery status from port to port, the Durban Container Terminals, Pier 1 and Pier 2, where the import volume pressure was most evident, had done well despite much time being lost due to weather delays this past week. 

The terminals are still being impacted by delays in evacuation of imports. The terminals are feeling this congestion on the landside which is now creating delays on the waterside. Currently, as at August 16, Pier 1 had two vessels at anchorage awaiting a berth. Pier 2 had six vessels, with an average berthing delay of four days.

Cape Town port appears that recovery has been decidedly better. Transnet Port Terminal said that Cape Town Container Terminal had minimal delays, and a balanced yard. 

The ports of Ngqura and Port Gqeberha are also recovering well.

Copper Price Bounces Back, the price of copper bounced back last week as worries about supplies from top producer Chile gathered pace.

BHP and the workers union at its Escondida copper mine said last week that they would extend government-mediated contract talks by a day in a last-ditch effort to stave off a strike. The world’s biggest copper mine accounts for about 4.5% of global copper supplies estimated at roughly 24 million tonnes this year.

Copper for delivery in September rose 1.9% from last weeks’ settlement price, touching $9,618 per tonne.

Meanwhile, concerns about Chinese demand and a firmer dollar tempered optimism for higher prices.

China’s January-to-July copper import volumes dropped by more than a tenth compared with the first seven months of 2020.

The biggest copper buyer in the world bought 3.219 million tonnes of copper from January to July, down 10.6% compared with the same period in 2020.

US legislation to regulate carriers shot down, The World Shipping Council has come out strongly against proposed US legislation designed to tighten regulation of carriers in order to address supply chain congestion resulting from record US consumer and business import demand, coupled with disruptions resulting from the Covid-19 pandemic. 

A framework has been shared which the WSC believes is flawed, particularly the suggestion that ocean carriers are solely responsible for the current supply chain congestion.

The congestion is widespread, with every link in the supply chain being affected, from marine terminals to truckers, rail cars and warehouses are all under tremendous strain. 

The WSC points out that what is “crystal clear” is that regulating only ocean carriers, or any other single class of supply chain provider is doomed to fail. 

The bill would require ocean carriers, under the threat of penalty, to guarantee the performance of other parties over whom they have no control, for instance by putting the burden on ocean carriers to ensure chassis, trucks and rail cars are available from third party providers.

The WSC has accused the government of tilting the market in favour of shippers in commercial disputes.

The organisation further warns that the legislation, if enacted, would incentivise trade partners to enact similar protective legislative and regulatory frameworks in their countries.

Steel prices in USA have risen 215% since March 2020 which in turn has destroyed many American jobs and negatively impacting many industries.  The increase to the import duty to 25% in 2018 implemented by Trump has been kept in place by the current Biden government and continues to cause no end of grief to industry at large.  

USA Air Cargo screening continues to be a challenge for some packaging and products that is deemed unairworthy unless it can pass through security screening.  The thought is that further down the line manufacturers can be accredited in some way and certify in other ways yet to be identified.

China’s port shutdown sparks worldwide fear, The Port of Los Angeles, which saw its volumes dip because of a June Covid outbreak at the Yantian port in China, is bracing for another potential decline because of the latest shutdown at the Ningbo-Zhoushan port in China, many companies chartering ships are already adding covid contract clauses as insurance, so they won’t have to pay for stranded ships.

The shutdown at Ningbo-Zhoushan is raising fears that ports around the world will soon face the same kind of outbreaks and Covid restrictions that slowed the flows of everything from perishable food to electronics last year as the pandemic took hold. Infections are threatening to spread at docks just as the world’s shipping system is already struggling to handle unprecedented demand with economies reopening and manufacturing picking up.

The port is actively negotiating with shipping companies, directing them to other terminals, and releasing information on a real-time data platform, it said. To minimize the impact, it’s also adjusting the operating time of other terminals to make sure clients can clear their shipment.

Rwanda to continue aiding Mozambique in fight against terrorism, earlier this week, the government of Rwanda indicated that it would continue to collaborate with the government of Mozambique as well as other partners in the next phases of stabilisation and development after Rwandan and Mozambican troops recently repulsed insurgents from key areas of the Cabo Delgado Province.

Joint forces captured Mocimboa da Praia earlier this month, a key Mozambican port city that had been the headquarters of the Islamic State-linked terrorist group in Cabo Delgado Province since 2015.

This strategic port city for Mozambique had been an important logistics point for the insurgents in addition to being the terrorists’ stronghold in the province.

After the insurgents’ main stronghold was captured, more than 90% of the province is now free where operations to wipe out the terrorists are now focused on smaller pocket areas.

“Smooth seas have never made skilled sailors”

Trade Winds bimonthly update volume 38

No increase for July! as the steel sector waited in anticipation, no news is good news as no price increase notices were released for the month of July from the various mills within South Africa, however international steel prices still remain volatile.

This will be only the second time this year that steel prices should remain unchanged barring any other factors such as labour increases or production costs.

South Africa in the midst of the third wave, the COVID-19 pandemic has begun running riot in South Africa with cases sky rocketing. Gauteng is now currently the epicentre of the virus.

Last week President Cyril Ramaphosa placed South Africa under alert Level 3 lockdown but with the cases increasing daily there are talks being held this week that the country could move into a higher level and Gauteng itself being placed into a further lockdown beyond that of the national lockdown.

Border updates, Beitbridge border post faced a water shortage earlier this week causing some delays as the work force at the border was reduced to 50%.

However, the issue was resolved and its all systems go at the border post.

According to personnel at the border, the closure was scheduled to last for 12 hours, from dusk till dawn, starting at 6pm on Monday evening and ending at 6am the following morning but the closure lasted for 24 hours.

There were reports last week that Kasumbalesa experienced delays.

The decision by the government in Kinshasa to test cross-border truck drivers in the Democratic Republic of the Congo itself, rather than risk fraudulent PCR test results for Covid-19, resulting in a queue south of its Copperbelt border crossing in the region of nine kilometres towards Chililabombwe.

Late last week Friday DRC officials called off the decision after irate drivers started refusing to cross into DRC at its busy Kasumbalesa border.

Authorities in Kinshasa initially appeared resistant to persuasion, saying that they had recorded a significant case load of fraudulent PCR tests and that they did not have the means to verify results.

However, the Zambian government’s appeal on behalf of transporters resulted in the DRC finally deciding to accept PCR results from other countries and to roll out rapid testing free of charge in the event of drivers arriving at its border without test results.

Sea carriers looking to add additional vessels, two major shipping lines, one focusing entirely on intra-Asian cargo, have collectively ordered four new vessels to be commissioned in 2023/24, supporting the view that ocean freight is on a juggernaut growth path with no slowing in sight.

The news comes amid growing criticism among agents that carriers, the majority of whom are seeing profits well above 50% while freight rates have spiked by as much as 350%, are not investing in enough newbuilds to address the imbalance between cargo demand and service supply.

In certain instances, criticism from the freight forwarding fraternity has been downright antagonistic, with some agents accusing lines of manipulating vessel calling shortfalls to increase rates on the back of capacity problems.

However, the newbuild order book expansion by Evergreen and intra-Asian carrier SITC serves to suggest the opposite, that lines are indeed beginning to look at rebalancing service vs demand.

Zimbabwe loses a third of its gold to Smugglers, Zimbabwe last year lost around a third of its average gold production to the black market.

The smuggling of gold, Zimbabwe’s top foreign currency earner, is estimated to cost the country $1.5 billion in lost revenue per year, according to the international Crisis Group.

Most of the precious metal is siphoned off by informal small-scale miners who sell their findings to illicit gold traders rather than government-appointed officials.

Fidelity Printers and Refiners on Tuesday announced the country had lost around 11 tons of gold to “leakages” in 2020.

The losses were mainly due to payment delays caused by foreign currency shortages that encouraged miners to sell to smugglers instead, FPR’s head of gold operations, Mehluleli Dube, told a parliamentary mining committee.

Gold miners are usually paid in US dollars, a much more stable and desirable currency than the ever-depreciating Zimbabwean dollar. They were legally obliged to sell 40% of their earnings to the central bank at the official exchange rate but that obligation has been reduced to 20% in an attempt to lure miners to bring gold to Fidelity Printers.

Zimbabwe’s official gold production dropped from a record 33.2 tons in 2018 to 19 tons last year mainly due to fewer deliveries from scall-scale miners. It is noted that small scale miners only sold 9.35 tons of gold to formal buyers last year, compared to 17.48 tons in 2019.

Copper prices climb again, the price of copper regained ground on Monday after hitting a two-month low on Friday.  Copper for July delivery was up 0.6% from Friday’s settlement price, reaching $9,196 per tonne midday on Monday in the New York Comex market.

China’s copper exports rose for a third consecutive month in May to reach their highest level since March of last year, customs data showed on Friday, as rising international prices encouraged traders to ship metal abroad.

However, last month’s surge in copper prices on the London Metal Exchange to an all-time high not only made imports less favorable for China, but also spurred shipments in the other direction.

Exports of raw copper and copper products amounted to 79,044 tonnes last month, up 3.4 percent from April and 67.7 percent year-on-year.

SADC leaders to send troops to Moz, Southern African leaders on Wednesday approved the deployment of the Southern African Development Community (SADC) Standby Force to Mozambique.

It is a move that demonstrated regional progress in addressing the crisis.

The deployment was approved at an extraordinary summit, held in Maputo, and attended by all 16 member states, including President Cyril Ramaphosa.

South Africa has repeatedly expressed the need for greater intervention in the region, even as Mozambique seemed resistant.

The deployment followed two extraordinary summits held earlier this year could bring some finality to the back-and-forth deliberations on how to respond to the growing regional crisis.

The SADC Standby Force acts as the region’s peacekeeping force and falls under the SADC’s Organ of Politics Defence and Security.

It is constituted when necessary, and the crisis it is responding to will determine the size of the force.

Upcoming Public Holidays:
30th June 2021 – Independence Day (DRC)
5th July 2021 – Heroes Day (Zambia)
6th July 2021 – Unity Day (Zambia)

“By crawling a child learns to stand”

Trade Winds bimonthly update volume 36

As expected, a big hit to the steel sector, following on from our previous publication, it was expected that there would be a steel increase for the month of June and unfortunately the news broke last week Friday as ArcelorMittal announced another increase with prices increasing across the board in the region of 8%-10% on base product.

This, once again, is another blow to the sector and downstream players with contracts and projects continuously being re-looked at as well as critical stock levels affecting delivery times.

Following extracted from an article published by CNN 19/05/2021

China and the United States are in a race for scarce commodities to rebuild their economies after the pandemic. That’s pushing prices through the roof — and is now threatening to throw Beijing’s recovery plans off course.

The cost of everything needed for China’s post-pandemic infrastructure boom, from steel and coal to glass and cement, is soaring. The price of rebar, a type of steel used to reinforce concrete, recently hit 6,200 yuan ($965) per metric ton in Shanghai, up 40% this year, and a new record high. Iron ore, which is used to make steel, has topped 1,240 yuan per metric ton ($194) on the Dalian Futures Exchange, a 25% increase since the start of the year.

Thermal coal, glass and aluminum are hitting all-time highs in China. The price of plasterboard is rising too. The situation with steel has become so acute that China’s leaders are warning of damage to the economy. And a popular idiom for defenseless — “without an inch of steel in hand” — is now being used much more literally on social media to describe desperate buyers.

China was the only major economy to dodge a recession last year when the pandemic hit, but it launched a $500 billion infrastructure-led plan to support its recovery from the slowest rate of growth in decades.

Construction is also part of the economic recovery in the United States and may accelerate soon. President Joe Biden proposed in March a roughly $2 trillion infrastructure plan aimed at helping the nation recover from the coronavirus pandemic, and reshaping the US economy to counter China’s rise.

“Small businesses are facing even tighter cash flows, because they have less negotiation power when prices increase in their upstream sector,” wrote Luo Zhiheng, chief macro analyst for Guangzhou-based Yuekai Securities. “They either have to accept higher production costs, or cut their production and sit on the sidelines.”

Recovery efforts hit a snag

The spike in steel and iron ore prices comes down to a combination of factors. Along with construction, electric vehicle production is also fueling the rise, according to analysts at Fitch Ratings. Cars need high-strength steel that can reduce weight and improve performance, and production of electric, hybrid and fuel cell cars have been skyrocketing.

China’s efforts to reduce carbon emissions has also caused steel supply to tighten, the analysts wrote in a report this week. China produced more than half of the world’s output of steel last year, and Beijing has been pressuring the industry to reduce output in pursuit of its goal to become carbon neutral by 2060.

A bruising trade battle between China and Australia may also be inflating prices. Beijing has put up barriers to entry on several Australian exports over the last year, including coal. While one of Canberra’s most important exports, iron ore, has been spared, Beijing has been looking for ways to reduce its reliance on the country.

There are already some signs that the price hikes are hitting China’s construction sites and factories, according to Wang Jiechao, chief construction sector analyst for Pacific Securities. He wrote in a Monday report that many construction companies, foundries and small household appliance manufacturers have stopped taking orders because of production losses.

“The rapid increase in commodity prices has seriously eroded the profitability of downstream manufacturing companies,” Wang added.

A recent survey of 460 construction companies nationwide revealed that many firms are feeling the pinch. Some 56% of respondents to the survey — conducted by 100njz.com, a Chinese construction industry data provider — said that the price hikes have affected their work schedules to varying degrees. Among them, 30% said they have suspended construction to control costs, while the rest have slowed projects down.

Meanwhile, 44% of the respondents to that survey said that although they are still moving ahead with construction as planned, they have had to reduce their steel purchases, which could lead them to consider suspending work in the future.

It’s also bad news for employment, according to Luo of Yuekai Securities, who noted that small businesses are struggling with the price hikes and also account for 80% of the country’s urban jobs.

Luo pointed out that April’s unemployment rate for young people aged 16 to 24 remained high at nearly 14% and their working hours decreased, “possibly because small businesses were running below capacity under the pressure of rising costs.”

Prices are rising everywhere you look

China is still exporting a lot steel, but the government is starting to discourage that in a bid to shore up supply at home. Authorities announced in April that starting this month, they would end export tax rebates for most of the steel products. Customs officials have also cut import tariffs for some steel.

Local governments, meanwhile, have opted for harsh measures in a bid to keep prices down. Late last week, regulators in Shanghai and the steelmaking hub Tangshan summoned major steel mills and ordered them to fix their prices “at reasonable levels.” Mills could face “severe punishments” if they collude to drive up steel prices, according to government statements.

Major futures exchanges in Shanghai, Dalian, and Zhengzhou have also tightened trading rules for steel or coal contracts, and have raised trading fees to cool down the market. Three top coal index compilers even stopped publishing daily updates. The move was to “stabilize market prices,” the state-backed China Coal Transportation and Distribution Association, one of the index compilers, said last week.

Still, prices for the metals remain elevated. And some analysts have pointed out that it will be tough for China to reign in commodity prices without compromising elsewhere.

Certain areas within South Africa are again plunging into total darkness without any prior notice from Eskom as the embattled state power supplier continues to struggle to keep the lights on across the nation which in turn affects all industries within the country, adding further costs to production as producers look to other means of power supply.

South Africa’s manufacturing surges, by 3.4% month-on-month according to data received for March.

The above-average output lifted the volume index to 99.6, a level last seen in January 2020. Last year the index had dropped to 54 by April, the lowest level it had been on record.

In comparison, by March this year, the level of production was up by 4.6% year-on-year.

It is noted that the annual recovery was driven by the manufacturing of food and beverages, as well as motor vehicles and parts.

Border updates,  and the recently opened One Stop Border Post at the Kazungula Bridge between Zambia and Botswana has already resulted in a significant reduction in the time it takes hauliers to use the once-treacherous Zambezi River crossing.

Delays, especially during last year’s coronavirus outbreak which caused mass disruptions on either side of the river, were further exacerbated by heavy rains earlier this year, with at least, on average one if not two of the three pontoons frequently being out of order, the rush to make up for lost time often resulted in trucks slipping off the ageing ferries.

However, this seems to be a thing of the past now as transit times have gone from an average 40 hours in April to 22 hours since the bridge opened on May 10, operations are going smoothly with minimal teething issues.

Transporters can now rejoice as one of the region’s most notorious border crossings has been wholly transformed.

No further delays or updates have been reported at Beitbridge or Kasumbalesa.

Protests claim a life, and the South African Police Service has confirmed that a driver burned to death in his cab last night on the outskirts of Harrismith after protesters threw stones at his truck on the N5 highway.

Protests over service delivery flared up earlier in the week along the N5 and N3 highways, major pass throughs between Durban and Johannesburg.

Whilst the police have been monitoring the stretch of road during the week, unfortunately the loss of life occurred.

Record copper price not all good for Zambian miners, and copper mining companies in Zambia are at odds with the record prices of copper, which have brought them significantly higher royalty bills than previously under the country’s current tax regime.

Zambia uses a sliding scale to determine its mining royalty rate for copper, linked to the international copper price. The scale is adjusted in that royalties are paid at higher levels as the commodity price climbs and is reduced as prices fall.

Starting at the minimum threshold of 5.5% when the copper price is less than $4,500/mt, rising to 10% when the copper price is $9,000/mt or higher. Which in turn means that copper mining companies are currently paying the maximum threshold for mining royalties.

Since 2019, when the new Zambian mining tax regime came into effect, mineral royalty payments have not been treated as a deductible expense when calculating corporate income tax. Income is taxed at the rate of 30% a year for base and industrial minerals miners. The effect of this is that mining companies are paying “double tax” as the companies are taxed on income that has already been paid over as a royalty.

Zambia is highly dependent on mining as its major productive industry, with the sector contributing 10% to the country’s GDP in 2019. Zambia’s mining sector accounted for 28% of the government’s revenues and 77% of export earnings, with copper accounting for over 90% of the sector’s exports.

In 2020, large scale copper mining companies recorded an increase in total copper production of 9.7% year on year.

Kamoa-Kakula starts production ahead of schedule, the joint venture between Ivanhoe Mines and Zijin Mining has achieved production several months ahead of schedule.

Whilst the company has described this feat as a “historic achievement” President of DRC, Felix Tshisekedi has said that the country is open for business and investment.

Although this exploration journey started well over two decades ago, it is also noteworthy that the Kakula deposit itself was discovered just over five years ago, which is remarkable progress by the mining industry.

In April, the Kakula mine mined 357,000 tonnes of ore grading 5.70% copper including 121,000 tonnes grading 8.40% copper from the mine’s high-grade centre.

Kakula is anticipated to be the highest-grade major copper mine in the world with an initial mining rate of 3.8-million tonnes a year, with an expected climb to 7.6-million tonnes a year in the third quarter of 2022.

Phase 1 is expected to produce 200,000 tonnes a year of copper and phases 1 and 2 combined are forecast to produce 400,000 tonnes a year. The current copper price also allows Ivanhoe and Zijin to mull over the acceleration of the Kamoa-Kakula Phase 3 concentrator.

France, the latest nation to aid Mozambique, after meeting with the French president, President Filipe Nyusi of Mozambique has advised that France has shown “complete willingness” to provide whatever is necessary for Mozambique’s fight against terrorism in the northern province of Cabo Delgado.

France has shown support but has left sovereignty in the hands of Mozambicans.

This appears to mean that any French assistance in the fight against Islamist terrorism will take into account the lines of intervention laid down by the Mozambican government.

The two countries must advance quickly to sign the agreements which will define the type of support granted by France.

As reported in the previous publication, the Portuguese government has also stressed its readiness to assist Mozambique in the fight against terrorism.

Some Portuguese troops are already in Mozambique providing the Mozambican defence and security forces with technical assistance and training.

The aim that the Mozambican government is to build up the capacity of the country’s own military than to rather have foreign intervention.

“Rain beats the leopard’s skin but it does not wash out the spots”

Trade Winds bimonthly update volume 23

Level 1 restrictions eased, on Wednesday night 11th November 2020, South Africa’s president, Cyril Ramaphosa announced the easing of South Africa’s level 1 lockdown, opening the borders up to international travellers as well as allowing alcohol to be sold within the pre-covid trading hours, this is yet another step in slowly opening up the economy and to allow more growth, although opposition parties and leaders have bemoaned the extension of the state of the disaster it seems the people of South Africa as a whole are feeling more positive.

Border updates, the Beitbridge saga continued since the last report, however as of yesterday it is noted that congestion has eased significantly, with compliments pouring in from the transport industry about the SA Revenue Service’s decision to discontinue issuing CN2 gate passes at Beitbridge, an intervention that now appears to have completely decongested northbound transits. There is however a slight delay on the Zimbabwean side as authorities were overwhelmed with trucks crossing from the SA side but they are dealing with each truck in good time. 

This is a breath of fresh air since the 21st of October when the congestion began, reports of crime and violence emerged as well as a driver losing their life.

We hope the new system implemented can keep traffic at a free flow for some time to come.

A joint effort between DRC and Zambian officials have effectively decongested the Copperbelt crossing of Kasumbalesa, that in the past has been known as a notoriously problematic border.

Prior to the Covid-19 lockdown, Kasumbalesa’s fragile workability could result in cargo disruption at any given time. The impact was immediately felt when COVID-19 hit, leading to a northbound cargo queue stretching some 90 kilometres south-east through Chingola towards Kitwe.

Knowing that vast action was needed to clear the border and boost imports and exports into the region which is known for its copper mines, DRC and Zambian authorities got together to combat a troublesome border which resulted in the decongestion in under a week. This just proves once again that when people come together nothing is impossible.

Zimbabwe under pressure to end gold sales, Gold mining investors are pressuring Zimbabwe to change a law forcing producers to sell their output to the central bank, who then part pays them in local currency that is useless outside the country.

Whilst mining investment is key to rebooting Zimbabwe’s collapsing economy, the nation suffers from a shortage of dollars. As the rally in bullion generates more interest in the industry, the government is weighing its options on whether to grant investors gold-trading licenses.

Zimbabwe currently forces gold miners to sell their bullion to Fidelity Printers and Refiners Ltd. It pays them 70% in dollars and the remainder in local currency.

Bravura enters the frame; Nigerian owned Bravura Holdings has $1 billion available for the development of a platinum mine in Zimbabwe.

The 3,000-hectare concession where it plans to dig the mine is in Selous, 80 Kms south of Zimbabwe’s capital Harare which is close to existing platinum mines.

Bravura is one of a number of companies that have secured platinum concessions in Zimbabwe as the government seeks to kick start its stagnant economy. Still, established platinum miners haven’t announced plans to expand their operations.

While Zimbabwe has the world’s third-largest platinum group metal reserves, investors have been deterred by frequent changes to mining laws and currency policies.

Rare diamonds have been discovered in Matabeleland South and Masvingo provinces, the findings come after Alrosa, a Russian mining firm had done extensive exploration at the Malipati Diamond Project and say these findings have the potential to change the face of Zimbabwe’s gem industry.

In collaboration with state-owned diamond miners ZCDC, Alrosa has come to this discovery on finding this “Type II” diamond. Type ll diamonds have no nitrogen in their composition and come with a much higher price tag to them.

Rushinga District in Mashonaland Central province there is a potential new Chinese investor looking at the exploration of iron deposits.

The investor, who already has steel smelters in China’s city of Handani are under pressure to curb pollution, has already partnered local investors with plans underway to develop mines and build smelters, this is, however, subject to an in-depth exploration to confirm commercial quantities and quality of the resource. There is evidence of the existence of iron deposits in mountain ranges of Mavhuradonha, which stretches into Mozambique.

The project has been in the pipeline for the past 18 months, but was delayed due to global pandemic, supply chains disruptions and travel restrictions.

The investor had plans to commence production in 2023.

A special tasks force within the Ministry of Mines and Mining Development, has been formed to oversee the implementation of the project.

Zimbabwe Iron and Steel Company is Zimbabwe’s only integrated steel firm, however operations stopped in 2008 due to lack of capital and poor management. The company had capacity to produce up to one million tonnes annually, the company was among Zimbabwe’s major foreign currency earners.

Kakula tunnels successfully connected, Kakula mine in Kolwezi, DRC which is being developed in the eastern part of the Kakula deposit has reached a major milestone as the Northern and Southern tunnels have now been successfully connected.

Kakula is the first of many underground copper mines to be developed in the 400sq km region, the average grade of copper is said to exceed 8%.

The Kakula Mine is expected to have a mine life of approximately 21 years, whilst Kakula West which is Kamoa-Kakula’s third underground mine to be developed has a projected mine life of approximately 16 years.

The underground development on the south decline was performed by the mining crew of JMMC who are the DRC subsidiary of leading Chinese mining contractor JCHX, the northern decline was performed by Kamoa Copper’s mining crews.

Further developments are planned to commence mid next year where a set of connection drives is expected to hole by June 2021 which will open up an additional high-grade and medium-grade mining block and phase 1 copper concentrate production from the Kakula Mine is scheduled to begin in July 2021.

Earlier in the month Nanjing Hanrui Cobalt Co Ltd, advised that they expect to start their cobalt production line in the DRC Later this month, moving into December.

The 5,000-tonnes-per-year production line in Kolwezi, DRC, was expected to be running earlier this year but due to the COVID-19 pandemic all operations were placed on hold.

The firm was still discussing sales contracts with foreign traders and domestic users.

Terrorising of Mozambique continues!  More than 50 people were killed in a terrorist attack last Friday in northern Mozambique where insurgents attacked a village.

Up to 2,000 people have been killed and about 430,000 have been left homeless in the conflict in the mainly-Muslim province. The militants are linked to the Islamic State (IS) group, giving it a foothold in southern Africa.

The group exploits poverty-stricken areas and the unemployed and grows their numbers by recruiting the youth in their fight to establish Islamic rule in the area. Many locals complain that they have benefited little from the province’s ruby and gas industries.

Zimbabwe president Emmerson Mnangagwa has recent said that he will be sending troops over to help with the insurgents.



 “If you climb up a tree, you must climb down the same tree”