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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 15

Tensions flare at Beitbridge, following weeks of up and down madness at the Beitbridge Border Post drivers have finally said enough is enough!  Over the past week, the queue going north at Beitbridge has grown, with reports emerging of corrupt police officials soliciting R500-R1000 bribes but the drivers are now pushing back.

From early morning on Tuesday this week, video footage emerged of truckers blocking the path of another truck being escorted by police to the front of the queue, the drivers confronted the official insisting the truck return to the back of the queue. This is not an isolated incident.

The queue is currently sitting around the 16km mark in advance of the potential shutdown.

Maersk resumes operations at CT Northbound, Strategies to reduce the backlog at the Port of Cape Town are bearing fruit, with Maersk announcing that it will resume calls at the port on the northbound rotation of the South Africa Europe Container Service (Saecs).

Due to prolonged delays at the port caused by Covid-19 staff shortages, Maersk announced in June that it had decided to bypass Cape Town on the Saecs rotation between Durban and the Port of Algericas (WAF1).

However, in a customer advisory notice released yesterday, Maersk said: “Waiting time in Cape Town terminal has decreased significantly which has allowed us to review our Saecs product.”

“We are pleased to inform you that we will revert back to Cape Town with our Saecs northbound call and resume WAF1 in Port Elizabeth to cover the Eastern Cape market to Europe.”

The shipping line will however continue to bypass the Cape Town southbound and there will be no change to import routings to Port Elizabeth and Durban.

Slump in production, Anglo America’s platinum production slumped by 25% in the first half of 2020 due to the lockdowns imposed in both South Africa and Zimbabwe.

It was also stated that total refined production including tolling declined by 46% to 1,246,900 ounces as the temporary closure of ACP and load-shedding in the first quarter impacted production.

Whilst things look a little bleak on the platinum side, Gold’s record run to almost $2,000 an ounce has burnished cash flows and driven a surge in shares of bullion producers. The rally provides a renewed test of discipline for Barrick Gold Corp. and peers after a similar climb a decade ago prompted a spate of inflated deals and overly optimistic investments that wasted billions.

For gold-mining companies, this is great news, with costs contained even after pandemic-related closures, virtually all are churning out impressive cash. In the first three months, Toronto-based Barrick alone generated $438 million in free cash flow based on a realized price of not far off $1,600, compared to $146 million a year earlier. 

Valuations look better too, especially for the sector’s largest players.

Power constraints choking sectors, South Africa continues to face electricity woes and there does not seem to be any light at the end of this tunnel.

Earlier in the year newly elected CEO of Eskom, André de Ruyter, positively said that there would only be three days of load shedding this winter however after three weeks of constant load shedding various sectors within the country are feeling the effects, especially the steel sector, this coupled with the impact of COVID and the never ending steel price increases which have now become a back to back pattern, the industry faces serious challenges with high prices, high demand but low output as the lockdown and electricity issues puts strain on production.

So far this year we have seen steel increase on average by 15-20%  with rumours of further increases monthly throughout the remainder of 2020.

“Don’t Let Yesterday Take Up Too Much of Today”