increase

Trade Winds bimonthly update volume 34

Steel price increase reminder! As of 1st May 2021 steel prices on flat product in South Africa will be increasing by R2,250 ton as announced by ArcelorMittal earlier this month, the biggest single increase the country has seen, taking the grand total of increases this year to R6000,00 ton.

Thankfully there has been no increase notices from the other steel mills within South Africa.

Introducing Thungela Resources, Anglo American PLC will be separating its South African coal mines into a new business this year.

Anglo American has been mulling an exit from thermal coal for over a year now and constantly reiterated that separating its South African business was the most likely outcome.

The new business, known as Thungela Resources Ltd is expected to be listed in Johannesburg and London in June. Investors will receive one Thungela share for every ten Anglo American shares.

The world’s biggest miners have been looking to exit thermal coal mining as investors say they don’t want exposure to the fuel and pollution. Anglo American PLC has already dramatically reduced its production in recent years, cutting output by more than half.

Implats Q3 production rises, South Africa’s Impala Platinum’s third quarter group output rose by 4% to 5.59 million tonnes at managed operations, with higher volumes reported at Impala Rustenburg, Impala Canada and Marula.

High prices for metals mined by Implats such as platinum, palladium and rhodium gave the mining company a lifeline despite the impact of the COVID-19 pandemic.

The platinum miner said group production in the nine months to March 31 rose by 11% to 17.38 million tonnes, the miner also noted the benefits from the inclusion of Impala Canada, which was bought in 2019, for the full reporting period.

Border updates, last week, transporters working the North-South Corridor into the Copperbelt and back were advised that there were holdups being experienced at Chirundu Border Post between Zambia and Zimbabwe.

The queue was roughly around 7kms long with around a 2-3 day waiting period for when trucks could move, there was no real confirmation as to why the border had a hold up, as it stands, its business as usual at the Chirundu border.

Staying in Zambia, there is some good news looming, with the leaking of the anticipated Kazangula bridge being opened. An inside source has told the Transit Assistance Bureau that a date has been proposed for the long-awaited opening of the Kazungula Bridge being May 10.

Although it seems too close to be true, being less than two weeks away, transporters are becoming quite excited by the announcement made by Transist.

The long-delayed structure, which was completed last September may finally be opened after being closed to traffic while public sector concerns were delaying the process and Zambia’s perennial cash flow issues impeded its ability to pay its share of fees to the contractors.

As of today, transporters entering Botswana via Pioneer Border Post from South Africa have been advised that health authorities in Gaborone have reinstated the PCR test.

The testing measures at the border has been tightened because drivers have been diverting their journeys to Pioneer because of not having to furnish PCR results.

The news has had an immediate effect in cross-border transport circles, with hauliers saying PCR costs which are roughly $46 and regular transits in and out of landlocked Botswana are going to hit them hard.

The pandemic has affected all forms of transport over the past year whether it be road, sea, air or rail transport and it seems that the struggle will continue for some time as ocean freight costs as well as air freight has surged with no positive outlook at the moment, in some countries such as America, it is noted that cargo can sit up to a month before it can be moved to the ports for transport.

Iron ore demand drives global steel prices, steel prices are spiking from Asia to North America, and iron ore’s relentless march towards a record is accelerating, as bets on a global economic recovery fuel frenzied demand. 

The outside world is finally catching up with the Asian markets as a global rebound drives a powerful wave of buying that cannot be matched by production.

The manufacturing and construction sectors are ramping up production as governments have pledged to splurge on infrastructure as they set their eyes on post covid growth.

Prices for hot-rolled coil are up three times the “normal” price in North America and they continue to soar in Europe. In China, steel is at its most expensive since 2008.

It is expected that worldwide steel demand will grow 5.8% this year to exceed pre-pandemic levels, China’s consumption which contributes to about half of the global total will keep growing from record levels, whilst the rest of the world rebounds strongly. It is noted that demand outside of China in April has been higher than that of previous years.

Iron ore is enjoying a near record level as spot prices are less than $1 away from their peak of $194/tonne. China’s steelmakers keep output rates at more than a billion tonnes a year to supply consumption to the ever-demanding economy, Beijing has set a goal of reducing steel production this year however that could prove difficult with consumption as strong as it currently is.

Top miners are enjoying their takings as Iron ore prices have bolstered their earnings even though they continue to struggle to supply enough of the raw material.

On the Stainless Steel front, the Chinese government has cancelled all tax refunds for Stainless Steel sheet, plate, pipe and fittings thus increasing production cost by roughly 13%.

Zimbabwe gold output down, Zimbabwe’s gold production fell 30% to 3.98 tonnes in the first quarter of this year, while export earnings from the yellow metal also declined.

The Reserve Bank of Zimbabwe did not give a reason for the decline, but small-scale miners who produce half of the mineral blamed the abnormal rainfall during this period which in turn resulted in shafts being flooded.

The Reserve Bank said the nation, which faces constant shortages of foreign currency earned $200 million from gold exports in the first quarter which is down from $226 million during the same period last year.

Total gold output tumbled nearly a third to 19 tonnes last year after small-scale producers diverted the metal to illegal private dealers who pay more than the central bank.

Zambia assures investors of better policies, Zambia’s president Edgar Lungu assured mining investors, in a speech this past Thursday, that his country will develop a more simplified tax administration system to facilitate them.

Zambia’s mining tax regime has been a thorny issue since the privatization of mines in the early 1990s. He said the he expects the mining investors to take advantage of the improved copper price of close to $9,000 a ton to up production and create jobs which in turn should fulfil the investors social responsibilities to benefit the locals.

Zambia is Africa’s second highest copper producer and is hoping to increase its production from the current 800,000 tons per annum to a million tons per annum.

The key to achieve this goal will be through a continued working relationship with investors such as First Quantum Minerals, which runs the country’s biggest mining operation at Kalumbila, northwest of the country.

Jubilee’s Project Roan delivers its first copper concentrate, the successful delivery of copper concentrate from Project Roan to the fully operational Sable Refinery is the first major step in the company’s commitment to achieve the targeted production of 25,000 tons per annum of copper within the next four years and taking a leading role in the processing of surface tailings in Zambia.

Project Roan is the first of three copper processing facilities that Jubilee target to implement to achieve this goal. Completion of Phase 1 on schedule demonstrates the team’s ability to deliver on their goals in a new jurisdiction.

The targeted significant ramp up of copper operations in Zambia is expected to further improve on Jubilee’s recently published record interim results for the six-month period to 31 December 2020, generating long term, quality earnings.

The company is confident that the completion of Phase 2 of Project Roan will be on time during Q3 2021, which will further increase the copper concentrate being delivered to the Sable Refinery. 

Kamoa Copper launches corporate identity, Kamoa Copper will operate the Joint Ventures mines in the high-grade Kolwezi copper district of Lualaba, in the Democratic Republic of Congo.

Ivanhoe Mines and Zijin Mining each own 39.6% of Kamoa Copper, while the DRC government owns the balance.

The Kamoa-Kakula project which is operated by Kamoa Copper, is expected to begin producing copper in July and through its phased expansions, will become one of the world’s largest copper producers.

According to a progress update issued by Ivanhoe in April, Kamoa Copper shattered all previous records in March, mining 400,000 tons of ore grading 5.36% copper, including 100,000 tons of ore grading 8.7% copper from the centre of the Kakula mine.

The company’s first phase of its 3.8-million-tonne-a-year mining and milling operation is 92% complete and the commissioning of its concentrator plant is under way.

Troika summit in Mozambique postponed, The Southern African Development Community has postponed an Extraordinary Troika Summit of the Organ on Politics, Defence and Security due to the unavailability of heads of states.

The leaders of SADC agreed to the postponement as SADC Organ chairperson, Botswana president Dr Mokgweetsi Masisi is currently in quarantine and incoming chairperson South Africa president Cyril Ramaphosa has been testifying at the Zondo Commission on South Africa.

The meeting, which was expected to take place this past Thursday in Maputo, is now expected to take place at a later date.

When the heads of state met on April 8, they, among other things, mulled over measures to address terrorism in Mozambique after the continued attacks by the Islamist insurgents in Cabo Delgado where dozens of civilians were killed and many others displaced.

SADC leaders directed an immediate fact-finding mission to assess and investigate the situation on the ground in Mozambique before and form of response is actioned.

“Seeing is different than being told”

Trade Winds bimonthly update volume 31

Steel price increases return!  Earlier this week various mills sent out steel price increase notices in the region of 5% to the sector, again adding further pressure to downstream industries. Constant challenges are being faced as prices continue to rise and the supply of steel is almost non-existent. It seems that the hope of the industry normalizing mid-year has a grey cloud over its head now.

A shock fuel price hike is also in place for the new month adding higher costs to logistics which in turn has negative effects down the line.

Another industry that is facing constant challenges is the plastic sector, Force Majeures implemented by Sasol in South Africa and other producers in America and Europe has resulted in massive increases in the range of 15% month on month is having a damaging effect, affecting prices on mining hose, PVC & HDPE pipes as well as rubber products.

The fuel price hike will also affect the plastic base price.

Border updates, Officials in Zambia stay silent as the Kazangula bridge lays dormant, rumours and guesswork that’s what fills the void of government sector officials who are not forthcoming with trustworthy information about the new bridge at the Kazungula border post between Zambia and Botswana.

Cross border operators carrying freight across the region are forced to use the pontoons which can only handle around 50 – 60 trucks a day whilst the beautiful Kazangula bridge is expected to handle at least 150 trucks a day. However, in all its glory, the bridge remains closed in the backdrop.

Rumour has it amongst transporters that the only reason the bridge remains closed is because money is still owed to the contractors by the Zambian government.

China’s Tsingshan to build mine and steel plant, China’s Tsingshan Holding Group is set to start developing an iron ore mine and a carbon steel plant in Zimbabwe from May, three years after the firm first announced the investment deal.

Tsingshan signed a $1-billion outline agreement with Zimbabwe in June 2018 to build a two-million-tonne-a-year steel plant and has been carrying out exploration and seeking more mineral concessions.

The Chinese company, through its Zimbabwean subsidiary Afrochine, already produces ferrochrome, which will also be used in the production of steel.

China has over the past few years emerged as a major foreign investor in Zimbabwe, with its firms mostly involved in mining of gold, chrome and diamonds and building power stations.

Zimbabwe has previously announced that it has a drive to increase mining revenue to $12Billion by 2023, last year, minerals earned the country $2.4-billion in exports.

Chimona mining invests in Bubi, Midlands based Chimona Mining Company has spread its wings to Bubi District in Matabeleland North where it has acquired new gold mining rights and will be setting up a processing centre under a US$500 000 investment.

The venture is expected to create more job opportunities in Matabeleland North and promote the formalisation of artisanal mining activities in Bubi, which is one of the richest gold districts in the country.

ZCCM on lookout for investors, Zambia’s state mining company is on the lookout for further deals as it prepares to complete its acquisition of a majority stake in Glencore’s struggling copper business in the country.

ZCCM Investment Holdings is considering any opportunities to increase the minority shareholdings that it owns in Zambia based companies.

ZCCM became an investment company in 2000 when Lusaka privatised the country’s mining industry, selling off controlling stakes in its prized copper mines to large mining groups. That process created Mopani Copper Mines, the business ZCCM is buying from Glencore, and Konkola Copper Mines (KCM), which is owned by Vedanta Resources.

Last year, ZCCM announced a change in strategy and said it would focus on mining and energy with the ambition of operating assets rather than just being a minority shareholder.

Ivanhoe completes phase one at Kakula, Ivanhoe Mines has completed 80% of phase one work at the Kakula copper mine in the Democratic Republic of Congo with first production targeted for July.

Ivanhoe is commissioning the concentrator plant at the Kamoa-Kakula operation, and has stockpiles already totalling over 2.16 million tonnes which contains an estimated 95,000 tonnes of copper.

The second phase expansion is set to begin during the third quarter of 2022. This phase is expected to double the mill throughput to 7.6 million tonnes a year. Phases 1 and 2 combined are forecast to produce up to 400,000 tonnes of copper a year.

Other engineering and construction activities underway at Kamoa-Kakula include the completion of upgrades at the Mwadingusha hydro-electric power plant and associated 220-kilovolt infrastructure to supply the mine with clean, renewable hydropower. The Mwadingusha hydropower plant is expected to deliver approximately 78 megawatts of power to the national electrical grid ahead of the start-up of the Kakula concentrator.

US to train Moz fighters, American military personnel will be spending two months in Mozambique, training the local soldiers in an aid to fight the jihadist insurgents.

The ISS has been in the gas rich Cabo Delgado province since 2017 and over the years have been growing in numbers and becoming more brazen with their attacks.

Earlier this week, the insurgents attacked children as young as 11 years old, beheading them with their violent attack. The violent attacks to date have claimed more than 2600 lives and has displaced over 670,000 people.

Few countries such as the UK, US, Tanzania, Zimbabwe and South Africa have voiced their concern and support for Mozambique but unfortunately it seems that its all just talk as the country continues to be battered by the Islamist group.

“A single stick may smoke, but it will not burn”

Trade Winds bimonthly update volume 27

Steel increase! as of last week Friday ArcelorMittal and other major mills in South Africa announced a further price hike in the region of 5% for February with further impending increases as the year goes on. This is putting an unbelievable amount of pressure on the steel sector in South Africa, coupled with the latest indefinite load shedding schedule, manufacturing, distribution and logistics have become a nightmare for all involved.

South Africa’s economy faces challenges, the decline in manufacturing production growth in November last year is a clear indication that South Africa’s economy is in for a rough ride to recovery, especially under the current adjusted level 3 Covid-19 pandemic restrictions.

It is noted that production declined by -3.5% year on year in November 2020, and at the same time also declined -1.3% month on month from October 2020, down from a growth of 3.2% from September 2020 to October 2020.

“The manufacturing sector remains key to the growth and development of South Africa due to its spill-over effect into other sectors of the economy such as the construction sector, especially through the Metals and Engineering (M&E) sector, which remains the major supplier of crucial inputs such as steel,” said Seifsa chief economist Chifipa Mhango. “The data released suggest a worsening trend following a slower decline in the previous months,” he added.

Record gold production achieved! Gold producers Caledonia Mining Corporation produced a record 57 899 oz of gold from the Blanket Mine in Zimbabwe during 2020 with an approximate of 15 012 oz of gold produced during the fourth quarter of 2020.

2020 is a record year for Caledonia who are also on track for the commissioning of Central Shaft to be completed in the first quarter of 2021.

In December Caledonia also announced that they had entered into option agreements on two properties in Zimbabwe, delivering on their strategy of organic growth whilst increasing the dividend for a fourth time at the start of January to 11 cents a share

It seems that the sky is the limit for Caledonia at the moment and their plans are paying of whilst also creating genuine value and returns for their shareholders

Zambian government claims Glencore stake, Zambia’s state mining investment arm ZCCM-IH has agreed to buy Glencore’s majority stake in Mopani Copper Mines in a $1.5 billion deal funded by debt and will seek a new investor, the government said earlier this week.

The sale follows Glencore’s attempt to suspend operations at the mine last year due to the low copper prices and COVID-19 disruptions which then prompted a government threat to revoke the company’s mining licences.

The takeover coincides with Zambia’s preparations for elections in August, with President Edgar Lungu courting voters in the copper belt. More than 15,000 workers would have lost their jobs if the mine was closed.

Glencore will continue to control buying rights for Mopani’s copper output until the transaction debt has been repaid which will be paid by giving Glencore creditors 3% of Mopani’s gross revenue from 2021-2023 and 10-17.5% of Mopani’s gross revenue from then on.

The country will have to attract new investors, it is said that companies from Britain, Canada, China, South Africa, Turkey and Qatar have expressed interest.

Political violence stops cargo movement, Cross-border movement in both directions through the Copperbelt crossing of Kasumbalesa between Zambia and the Democratic Republic of the Congo has ground to a halt because of political unrest.

Protest flared up in the town of Kasumbalesa north of the border which unfortunately effected the flow of freight through the border.

A crucial transit on the North-South Line into the DRC’s copper mining areas in Haut-Katanga province, Kasumbalesa has been quiet and free-flowing over the last few months.

Challenges in the past have regularly caused congestion at the border however the events earlier this week represent the first time in months that Kasumbalesa, rather than other NSL crossings like Chirundu and Beitbridge, has led to cargo on the NSL coming to a halt.

Port of Beira shuts shop as storm Eloise approaches, The Port of Beira is taking no chances as storm Eloise spins in a south-easterly direction towards the coastline of Mozambique, although the eye of the storm was expected to pass south of the port and make landfall today in the vicinity of Vilankulos which is roughly 500 kilometres south of Beira, the latest update is showing that the storm is going to hit the port directly.

The last time the city of Beira had to contend with a severe weather event was in March 2019 when Idai cut a path across the old city, these days the focal point of intensified reinvestment as Mozambique positions its ports for ramped-up logistics.

The SA Weather Service has warned that the cyclone, much like Idai, will increase in intensity as it makes its way across the channel’s warmer water with an anticipated speed of 166-213 kilometres an hour by the time it hits the coast.

From there it’s expected to make its way across Mozambique’s provinces of Inhambane, Gaza and Maputo further inland.

Authorities in South Africa’s provinces of Limpopo and Mpumalanga have been on high alert, with rain and extreme wind predicted despite Eloise expectedly losing force the further it moves into the interior.

Calls for the US and France to assist, African Energy Chamber chief executive NJ Ayuk is appealing to the United States and France to intervene in the insurrectionist violence currently threatening resource exploration in Mozambique.

Such a move is crucial not only to protect the liquid natural gas interests of ExxonMobil, the US multinational petroleum company involved in Cabo Delgado province, but also to secure the continent’s energy prospects.

There has also been appeals to France to do the same on behalf of Total, the other major multinational that has invested billions in Mozambique’s LNG fields south of its Rovuma Basin border with Tanzania.

Government leaders will need to reach out to militant groups and begin a confidence- and trust-building process that will hopefully lead up to a mutual ceasefire agreement.

In this respect, US and French diplomatic involvement could prove fundamentally important in defusing the powder keg situation in Cabo Delgado.

2021 will be “the decisive year” for defeating terrorism in the northern Mozambican province of Cabo Delgado, according to the newly elected Maj-Gen Eugenio Mussa.

He called on Mozambican troops to act rigorously, to wipe out definitively the armed groups that have been terrorising several Cabo Delgado districts since October 2017.

French owned Tota has ordered a temporary evacuation of some of its workers from the Afungi Peninsula, an area which has experienced one of the most recent attacks by the insurgents.

“Don’t set sail on someone else’s star”