steel

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 41

Fuel hikes continue to hammer the consumer, back-to-back fuel increases have begun to show its ugly face as manufacturing costs are starting to climb as well as the base price of PVC and HDPE has increased as they raw material is directly affected by fuel price changes.

Border updates, no current delays or issues have been reported at the various borders within Southern and Central Africa.

Potential steel strike on the cards! A dispute over salary increases for workers in SA’s engineering and steel industry has been declared by the National Union of Metalworkers of SA. The union is now threatening strike action in the industry, which could be disastrous for an economy that took a R50-billion hit due to the recent social unrest. 

A general strike in the public sector, which could have shut down state hospitals, schools, and police stations, has been averted but possible industrial action might be in the offing in SA’s engineering and steel industry. 

A strike in the engineering and steel industry, which contributes about 10% to SA’s overall economic activity, could further harm an economy that is still reeling from Covid-19 related lockdowns and the recent week of anarchy. 

The National Union of Metalworkers of SA (NUMSA), which claims to have more than 339,000 members, has trashed the government’s offer for public servants, calling it an “insult” because public sector unions were pushing for an increase of at least 8%. 

NUMSA is also seeing red in the engineering and steel industry as the union has threatened to go on a “mother of all strikes” for higher pay. NUMSA has demanded a salary increase of 8% for workers in the engineering and steel industry for one year with an adjustment of consumer inflation plus 2% for the following two years. This works out to salary increases of just over 6% because the SA Reserve Bank expects inflation to average 4.2% and 4.5% in 2022 and 2023 respectively. 

Employers in the engineering and steel industry are not entertaining NUMSA’s salary adjustment demands as they have tabled a 4.4% increase for 2021, an inflation plus 0.5% increase in 2022, and inflation plus 1% increase in 2023. Using the Reserve Bank’s inflation forecast, the offer of employers works out to salary increases of about 4.7% in 2022 and 5.5% in 2023.

The employers are represented by industry bodies including the Steel and Engineering Industries Federation of SA, the South African Engineers’ and Founders’ Association, and others. 

NUMSA has rejected the offer by the employers and declared a dispute on Thursday 29 July at the Metals and Engineering Industries Bargaining Council. NUMSA wants the employers to reconsider their salary adjustment offer, failing that, the union will “serve employers with a 48-hour notice for an indefinite national strike.”

The union has implored other workers in the automotive industry, component supplies, tyre sector, mining, aviation, and all ports to join the possible strike in solidarity. This would be a disaster for the economy, which suffered a R50-billion hit in its output due to the recent street violence and looting that also blocked key supply chains in the broader manufacturing industry from operating.

This past Monday, SEIFSA, who employ about 190,000 workers in the engineering and steel industry, declared a counter dispute against NUMSA at the bargaining council over the union’s refusal to accept the offer by employers. The counter dispute will ensure that employers have the right to implement a lockout of workers if they were to go on a strike. In other words, workers represented by NUMSA could be excluded from their workplaces until the dispute is resolved. 

It is noted that SEIFSA has approached the bargaining council and has scheduled a special meeting on Tuesday 10 August between all parties in order to decide on how best to progress the deadlock.

Transnet NAVIS system fully operational, Government has announced a breakthrough following Transnet’s IT security breach last week.

According to a statement from the Ministry of Public Enterprises, Transnet has managed to restore operations at the ports fully, which now enables the country’s supply chain and logistics system to resume normal operations.

The main system responsible for the container operations, the Navis N4 terminal operating system has been fully restored and customers are now able to access the customer links to facilitate imports and exports.

The shipping lines, accounting for 70% of the cargo moving across the ports, have given the assurance that South African ports will not be bypassed, and they will continue to work with Transnet during this recovery period.

Giant leaps with Manhize steel works in Zim, the recent US$1 billion investment into Zimbabwe’s new steel industry and surrounding sectors remain on course for production to start next year.

The ferrochrome smelters in Selous are ready to go, Hwange’s first coke battery is open with the second under construction and now the planning and layout work being done at Manhize where the iron ore will be mined and steel smelted and processed.

Manhize is situated in the south-west district of Chikomba, close to Chirumhanzu and Kadoma where all three areas are seeing the mines, steelworks as a hub for local development and job creation.

Although the giant Chinese investor is opening the mine, building the steel plant, and building the houses where its workers will live, it will not be running the shops, the service stations, the banks and all the other economic activity that the large workforces will require, so there is a lot of scope for Zimbabwean investors and businesses.

The huge investment has so many advantages, Zimbabwean industrialists get a primary raw material, a full range of steels and steel products on tap, while mature industrial nations might be talking about the post-industrial societies they are building, it is a fact that no country can move its industry forward without that heavy industrial base.

Manhize mills is planned to be the largest steel producer in Southern Africa, producing a wide range of steels and stainless steels. While the Zimbabwean mining sector, construction industry and others will be buying a share, much of the production will be exported. 

Chrome export banned in Zim, the exports of chrome ore have been banned with immediate effect and exports of chrome concentrates from July next year, as there are now enough smelters in the country to ensure that all exports are of ferrochrome ingots.

At the same time Cabinet has agreed to work with private investors to set up gold centres to assist small-scale miners produce more efficiently and will be welcoming a new investor in diamonds, Ashelroi Trading and Services, whose plans are to set up a cutting and polishing centre in Zimbabwe.

Gold centres are expected to be established in Makaha, Odzi, Mount Darwin, Shamva, Mazowe and Silobela

The three measures are all designed to boost production and the value of the products that are eventually exported.

The move on chrome, reversing a temporary policy of allowing ore exports, merges with the strategies outlined in the National Development Strategy 1 which wants mineral exports to be partially processed in Zimbabwe before export to add value.

Zimbabwe boasts the world’s second-largest chromium reserves after South Africa and the mineral is expected to boost the vision of attaining a US$12 billion mining industry by 2023.

Production at KCM plummets, Global copper prices have reached record highs in recent months trading at $10,460 per tonne at the end of May.

For a copper-based mining economy like Zambia this should be generating increased tax revenues, and subsequent social benefits, as companies maximise their production to take advantage of these high prices. Across the private sector this is happening, however at government-run mines this is unfortunately not the case.

Production at Konkola Copper Mines has collapsed since the government effectively took over control of the mine from Vedanta Resources in May 2019, with copper production falling by almost 70%. KCM was averaging 8,000 tonnes copper production per month, that figure has now plummeted to roughly 2,000 tonnes per month. Mine development has dropped significantly which is going to put thousands of jobs at risk and as well as the potential shutting down of the mining business.

In response the government has tried a number of desperate moves aimed at improving production rates and bolstering profit margins by slashing the 5% import duty on foreign concentrates as well as ordering ZESCO to supply electricity free of charge to allow KCM’s smelter to run.

Zambians are missing out on high copper prices, following a difficult period in 2020 when the commodity price crashed. Given that copper production is worth 10% of the country’s GDP, this is money that Zambians cannot afford to go without.

Vedanta, whom were previously in control of the mine, had been Zambia’s largest public employer and responsible for 1/5th of the country’s overall copper output.

Vedanta have promised an additional $1.5 billion in investment if the government hands them back control of the mine.

Botswana joins in sending troops to Mozambique, Botswana’s security cannot be attained without that of her neighbours, President Mokgweetsi Masisi last week Monday.

Speaking at a ceremony to send off members of the Botswana Defence Force to Mozambique as part of the Southern African Development Community’s standby force to help fight terrorism in Cabo Delgado, he said a deceptive enemy awaits them.

“As your commander in chief, I am alive to the fact that you will be facing a deceptive enemy which is likely to use asymmetric warfare, unconventional and underhand warfare tactics against yourselves and the population you will be protecting. As professionals, you stand for much more than they do and must avoid emulating them and sinking to their level,” he said.

The Botswana soldiers will join soldiers from South Africa as well as soldiers from Rwanda who were deployed early in July.

Upcoming Public Holidays:
9th August 2021 – National Women’s Day (RSA)
9th August 2021 – Heroes’ Day (Zimbabwe)
10th August 2021 – Defence Forces Day (Zimbabwe)

“When everything seems to be against you, remember that the airplane takes off against the wind, not with it”

Trade Winds bimonthly update volume 40

No steel increase for the month of August, steel prices are set to remain the same as ArcelorMittal has not announced any price increase for the month of August, however after last weeks protests a Force Majeure was declared as no goods could move from the various plants. This has put a strain on supply as a backlog has been built up.

The Force Majeure from ArcelorMittal remains in place until further notice.

A further fuel hike is expected for the month of August, again contributing to logistic costs and we are most likely going to see an increase in freight rates.

Chaos, rioting, looting destroys the economy and sectors, there was a week of total madness and chaos in South Africa as protestors, rioted and looted in the name of the former president.

To looting and burning shops, to stealing infrastructure, the total cost of damages is still being calculated.

KwaZulu-Natal’s total cost of damages has been calculated to over 20Billion Rand and an estimated 55% damage to the province’s GDP. Gauteng’s total losses are still being calculated.

The estimated damage to the trucking industry alone following the violence and looting in KwaZulu-Natal and Gauteng is R250-R350 million in burnt-out trucks and cargo. This doesn’t account for the amount of trucks that had to remain in place as the looting went on.

It is noted that the loss assessment for the road freight sector is based on initial figures and could increase.

Not only has it impacted hugely on the economy of the South Africa, but it has set the recovery of the economy back by at least 10 years, if not longer.

The supply chain from the Port of Durban to Gauteng and cross-border was completely cut off, with the N3 not being passable for trucks to supply much-needed fuel, groceries, pharmaceuticals, and many other supplies. The food security in KwaZulu-Natal and Gauteng will be severely impacted over the next few months, and it will be a gloomy picture as those companies that have been impacted by the devastation try to rebuild and start again.

What has happened in South Africa over the past week has not only impacted on the economy of South Africa, but it has also impacted on other landlocked countries in the SADC region who rely heavily on South Africa for imports of fuel, groceries, pharmaceuticals, mining equipment and vehicle spares. These countries that have used South Africa in the past as a transit route for exports through the Port of Durban will now most likely turn to alternate routes for exports such as Walvis Bay, Beira, and Dar es Salaam.

The Port of Durban in the last few years seen a decline in exports of copper and cobalt from the Copperbelt in Zambia and DRC due to inefficiencies, and the Port of Dar es Salaam now exports 73% of all DRC’s copper. The Ports of Walvis Bay and Beira have both recently built world-class container terminals that can now challenge the Port of Durban. They are more efficient, and their costs are lower than the Port of Durban.

Despite all the doom and gloom there is one positive to look forward to. South Africans by nature are resilient people and we will not let this type of behaviour define us.

Dip in SA mining production but positive outlook on the cards, South African mining output was 3.5% lower in May than in the preceding month, statistics have shown. This is disappointing but amid red-hot commodity prices, the sector remains one of the bright spots in an economy that is literally going up in flames in places at the moment.

On a year-on-year basis, production increased by 21.9%, but that was off a low base as in May of last year the sector was in the process of a gradual reboot. Indeed, it fell almost 30% in May 2020 compared with the same month in 2019, Stats SA’s historical data show, however the overall picture to date is positive.

Reflecting the surge in prices on expectations regarding the global economic recovery, mineral sales leapt by 88.2% in the year to May, led by platinum group metals, which soared by 258.2%.

The roaring commodities cycle has benefited South Africa’s wider economy, leading to hefty trade and current account surpluses and underpinning the often vulnerable rand. It is also giving investors a reason to at least hang on to their shares as rich dividends have been paid out with a lot more cash on the horizon.

But the current wave of looting in the wake of the incarceration of former president Jacob Zuma could bode ill for the sector this month, given the potential disruptions to supply chains. Mining output has so far been unaffected but if fuel and other supplies are affected, the sector’s productive capacity will not escape unscathed. Then there is the small matter of getting product to ports in KZN amid the mayhem.

Global mining giant Rio Tinto mothballed its Richards Bay Minerals operation in response to ongoing community violence, which included the murder in May of general manager Nico Swart. Two years ago, it halted a planned $465-million expansion to the asset for the same reason. That was all a dress rehearsal for the unfolding failure of the state, seen vividly this week in the skeletal remains of looted and torched shopping centres and warehouses.

Transnet suffers cyber-attack! Early yesterday morning, South Africa’s entire port and rail network was shut down by the biggest cyber breach in Transnet’s history after hackers broke into the state-owned company’s country-wide system used for the movement of cargo.

The software security breach that paralysed the country’s port and rail network will require outside intervention from a highly capable IT professional to undo.

The attack was so broad that the gates allowing personnel to enter and exit the ports were stuck shut.

The state-owned logistics company has said that port and rail systems will continue to operate using manual systems, which means overall operations will be heavily affected.

IT at Transnet has also asked users to refrain from sending mails to the port terminals as well as the EDI route, the NAVIS applications and the Transnet website itself.

Transnet said that it was working to reduce downtime to ensure that the systems were up and running as soon as possible.

At this stage, it has not confirmed how long it will take before its systems are back online and fully operational.

Load-shedding returns! with the cold weather back, Eskom has announced at any given time that load-shedding will be implemented without warning if needs be.

After last weeks event, this is the last thing the country needs right now.

It’s been more than a month since President Cyril Ramaphosa lifted the limit for generation for companies without the need for a licence from 1MW to 100MW, but gazetting of the amendment is taking far longer than necessary.

After grim years of load-shedding, it seemed that South Africa’s future was brighter, with cutting of red tape for embedded generation projects of up to 100 MW. This frees up industry and business to build and use their own substantial embedded generation capacity, giving them a more reliable electricity supply and easing pressure on the national grid, however weeks later, we’re still waiting for Minister of Mineral Resources and Energy, Gwede Mantashe, to formally gazette this updated limit in an amendment to Schedule 2 of the Electricity Regulation Act.

When the president made the announcement in June, he said that the relevant legal processes would be followed and gave the minister 60 days to gazette the amendment.

Outa believes this matter is urgent and not complicated and that 60 days are not required waiting time but a maximum.

Border updates, no current delays or issues have been reported at the various borders within Southern and Central Africa.

Delays were experienced at Beitbridge during last weeks’ riots where queues of up to 7km’s were being experienced, this has dissipated since the beginning of this week.

Competition in the shipping industry to be addressed, The Federal Maritime Commission and the Department of Justice Antitrust Division have signed an interagency Memorandum of Understanding (MOU) to foster increased cooperation and communication in their respective oversight and enforcement responsibilities of the ocean liner shipping industry.  

FMC Chairman Daniel Maffei and Acting Assistant Attorney General Richard Powers signed the first-ever MOU between the two agencies following the executive order addressing competition issued by President Biden.

The MOU establishes a framework for the FMC and the Antitrust Division to continue regular discussions and review law enforcement and regulatory matters affecting competition in the shipping industry.  It also provides for information and expertise exchanges between the agencies that may be relevant and useful in meeting their oversight and enforcement responsibilities. 

The glory days for shipping lines, whose increased rates and charges have been the subject of intense scrutiny, may be over.

The International Federation of Freight Forwarders’ Sea working group has been actively campaigning against increased rates and charges from shipping lines for some time

The crackdown is believed to be part of a more wide-ranging drive to root out anti-competitive behaviour in all sectors of the US economy.

Air shipments leaving USA require full screening, The International Civil Aviation Organization now requires 100% of all international airfreight to be screened, this was implemented 1 July 2021.

Originally, only shipments originating from a known shipper transporting on a passenger airplane needed to be screened however from the beginning of this month, cargo moving on all-cargo aircrafts must be screened regardless if it’s a known or unknown shipper.

This has already caused delays in cargo moving as many airlines’ warehouses are already at full capacity with the screening adding to this woe.

Another issue with this is that the shipper will now also be paying for the screening service which is charged by the relevant airlines.

Zimbabwe economy expected to grow next year, Zimbabwe’s economy is projected to grow by 5.4 percent next year, driven by growth in mining, manufacturing, and electricity sectors.

According to the 2022 budget strategy paper presented by the finance minister during a cabinet meeting, government revenue is expected to rise to 17.8 percent of the gross domestic pro (GDP) next year from 16.4 percent in 2021.

Expenditure will also increase to 19.4 percent of the GDP from 18.2 percent in 2021.

The Zimbabwean government has projected the country’s economy to register a 7.5-percent growth in 2021, recovering from a recession last year.

Meanwhile, in order to boost foreign currency earnings from tobacco, the cabinet had approved a new policy to localize the financing of tobacco production, as opposed to the current system where the bulk of the crop is financed through offshore funding.

Tobacco leaf is one of the major foreign currency earners for Zimbabwe.

South African troops land in Mozambique, a division of the South African National Defence Force arrived in Mozambique’s Cabo Delgado province earlier this week.

An image surfaced showing SANDF plane offloading soldiers, military vehicles and equipment. The troops are said to be special forces who will form part of the Southern African Development Community’s standby force.

The deployment was originally planned for the 15th of July however Mozambique had not yet signed the status of forces agreement that would authorise regional boots on the ground.

Further details of the force are still unclear. It is also not clear to what extent the SANDF’s internal deployment to respond to the unrest in KwaZulu-Natal and Gauteng will affect South Africa’s role in Mozambique.

Exciting times for some as the snow falls! Snow has fallen over various parts of South Africa over the last few days namely in Kimberly and the Eastern Cape.

For some it’s the very first time they get to enjoy what is possibly a once in a lifetime experience whilst others may dread the cold that follows.

Here are some images of the snowfall:

Kimberley city centre:

Image via: The South Africa

Children playing in the snow:

Image Via: Times Live

Karoo National Park:

Image Via: SANParks Twitter Account

“It always seems impossible until it’s done”

Trade Winds bimonthly update volume 39

Steel prices remain volatile, steel prices and supply remains volatile within South Africa and across the world at the moment, prices abroad are seemingly increasing per ton on a weekly basis.

Currently there are no talks of a further increase for the month of August but this could change in the coming week, if no increases are announced then the rumours from earlier in the year that the industry would settle by 3rd quarter could prove true.

Another possible contributing factor is that fuel in South Africa has increased on a month-to-month basis thus increasing charges on the logistic side of things which in turn will push up production costs.

EU steel shortages to continue throughout the remainder of the year, European steel distributors have been struggling to get the necessary volumes of finished steel from either domestic or overseas suppliers, adding that they do not expect the situation to improve any time soon.

In addition, end users are also facing problems securing steel products while also having to contend with rising steel prices.

So far, mills can get higher prices and distributors, manage to pass this rise to the end users. The impact of the price increases have yet to been seen on the relevant industries and companies.

Steel sector faces potential crisis from China, the global steel market is facing short-term headwinds due to China’s unfavourable policies to harness inflation whilst aiming to achieve net-zero carbon emissions.

China’s commitment to control steel production this year has led to price adjustments recently.

As Chinese steelmakers have seen profit decline to around breakeven level, there is limited room for further price cuts, with steel prices forming a bottom, however global steel demand remains strong, thanks to the rolling COVID-19 vaccinations easing the global health crisis together with worldwide government stimulus packages.

Steel demand from construction companies and automakers has shown no signs of subsiding but steel supply remains tight due to limited shipping capacity and labour shortages.

Based on international steel prices, as well as increases in iron ore and coking coal prices, we expect China Steel to raise prices further in the third quarter.

Level 4 announced, on the 27th of June, President Cyril Ramaphosa announced that South Africa would enter a level 4 lockdown for two weeks.

It is noted that the current level is expected to be extended by a further two weeks which has once again, become detrimental to the economy.

Currently all gatherings are prohibited within Gauteng as well as Schools, Gyms and restaurants to name a few on a national level. The sale and distribution of alcohol is also prohibited unless the use is for sanitisers. There is also a curfew in place from 21:00 – 04:00.

Border updates, no current delays or issues have been reported at the various borders within Southern and Central Africa.

Delays were experienced at Beitbridge just over a week ago, however this was due to peak times of the month where cargo movement is at its highest.

Transnet reaches wage agreement, Transnet has reached a wage agreement with its recognised labour unions, the SA Transport Allied Workers’ Union and United National Transport Union.

In terms of the agreement signed at the beginning of the month, the parties have settled on a 5% increase for the current financial year for bargaining unit employees.

The company’s main focus remains on ensuring financial sustainability and operational improvements in the business, to drive competitiveness of South Africa’s logistics system in all the segments that they operate.

Ocean rates soar, shippers are paying well over 300% more per box carried at sea, yet have to contend with the worst schedule reliability that the export-import industry has had to deal with since the advent of containerisation.

The exact year-on-year increase is as high as 332% for the majority of lines.

However, the exorbitant increase in ocean freight rates is not reflected in schedule integrity and is in fact far from it.

Transpacific traffic has recorded 401 vessels being at least 14 days late or longer so far this year. For the same period, Europe-Asia traffic had 144 vessels arriving late, also by more than two weeks or longer.

Previously, the average delays had been around four days, the new average was now at least six days.

The rising cost of ocean freight rates could see traders coming up with alternatives to the status quo.

Demurrage and detention charges are also contributing to increased rates as a recent report showed that average D&D charges across the world’s 20 biggest ports have doubled since last year with an estimated increase of +104% after two weeks.

2nd Quarter shows jump in revenue for TEU, evidence of the continued upward trajectory in carrier fortunes is prominent in the latest results released by Hong Kong-based OOCL.

In the second quarter ended June 30, total volumes were 15.4% up from the same period last year while total revenues increased by 119.0%.

Overall, the average revenue per TEU was up by 89.7% compared to Q2 last year.

Loadable capacity was up 12.4% with the overall load factor 2.2% higher.

Looking at a year-on-year comparison for the first half, total revenues went up a massive 107.6% while total volumes increased by 19.5%.

Loadable capacity increased by 13.7% and the overall load factor was 4.2% higher.

Overall average revenue per TEU increased by 73.8% compared to the second half of last year.

Air cargo on the upward, the latest air cargo results for May, reveal the sector’s continued strong growth trend.

Global demand, measured in cargo tonne-kilometres (CTKs), was up 9.4% compared to May last year. Seasonally adjusted demand rose 0.4% month-on-month in May, the 13th consecutive month of improvement.  

The pace of growth slowed slightly compared to April, which saw demand increase 11.3% against pre-Covid-19 levels. Notwithstanding, air cargo outperformed global goods trade for the fifth consecutive month.

Zimbabwe planning on curbing smugglers, Zimbabwe is drafting legislation which will compel small-scale gold miners to register their operations as the southern African nation seeks to curb gold smuggling.

Government is in the process of putting a statutory instrument for all the gold producers in an effort to stop prevent the gold from being taken out of the country, similar to what the country does under tobacco where there is a grower’s number.

Zimbabwe’s gold deliveries for the five months through May plunged 24% to 7,030 kilograms from a year earlier.

More than $1.5-billion of gold is illegally shipped out of Zimbabwe every year, depriving the cash-strapped economy of crucial foreign-exchange revenues.

Looming hunger crisis in Mozambique, over 730,000 displaced people in conflict-ridden Mozambique could face a hunger crisis unless urgent funding is secured.

Insurgents have been wrecking havoc in the gas rich region of Cabo Delgado for over four years now with attacks escalating over the past year with one of the deadliest attacks taking place earlier this year where dozens were killed and thousands had to flee.

There is currently an urgent appeal for $121 million by the UN World Food Programme to support affected people until the end of the year but there is warning that the WFP could see itself rationing or completely pulling all food assistance in August if no additional funds are raised.

“He who refuses to obey cannot command”

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 35

Another increase looming! Two of the major mills within South Africa have notified that there is a potential increase in the range or R1500.00/Ton for the month of June.

The country waits in anticipation for notice from the biggest mill within the country, ArcelorMittal, if there will be another increase on the back of the previous staggering R2500.00/Ton

To add to the industry’s wounds, the Rubber and PVC sector experienced a 17% immediate effect increase, the first of its kind. The increase has caused a serious impact on current projects and contracts.

South Africa mining output soars, The March reading was the first positive one since February last year, after the February 2021 number was revised into negative territory.

The 21.3% leap was partly attributable to base effects. In March last year, mining output declined 14.9% year on year as mines cut production and sent workers home ahead of the start of the hard lockdown later that month. 

This was the biggest bounce since March 2015, when a rise of 21.8% was recorded, the biggest record was noted in October 2013 at 23.2%.

The latest number is clearly a positive sign for the sector and the overall economy.

The April number will almost certainly be a new record, in part because of base effects after mining output declined 51.7% in that month last year. Stay tuned for that number, it’s bound to be a whopper. 

Border updates, on the 2nd of May the Zimbabwe Revenue Authority announced that there will be upgrades taking place at the Beitbridge border post which is going to cause significant delays for up to six weeks.

The upside for cargo going north is that the long awaited Kazangula bridge has finally been opened, as of 10 May 2021 the bridge is now fully operational.

Kazungula was meant to be completed by 2018, but the government in Lusaka’s consistent failure to meet financial commitments, as agreed with Daewoo, regularly delayed work on the bridge.

Speaking at Monday’s opening of the Kazungula multimodal bridge across Zambia’s Zambezi River border with Botswana, Zambia’s President Edgar Lungu recommitted his country to building another bridge that will possibly change the face of bulk-haul logistics in the sub-Saharan region.

Temporarily called the Kasomena-Mwenda toll road bridge and border post, the project entails an upgrade of the N5 from the copper-mining nerve centre of Lubumbashi north-east to the Luapula River between the Democratic Republic of the Congo and Zambia.

The crossing will most likely be immediately south of Kasenga from where it will proceed in an easterly direction before heading north-west to Zambia’s Nakonde border post with Tanzania.

Copper price hits new high, shortages of copper and declining inventories could drive prices to levels beyond current record highs unless scrap supplies increase.

Scrap accounts for about a third of the roughly 30 million tonnes of annual global copper supplies, as copper prices rise, the flow of scrap accelerates as the market attempts to cover the gap between demand and supply.

Copper for delivery in July was up 0.9% earlier this week, with futures trading at $4.7620 per pound ($10,476 a tonne) on the Comex market.

Bank of America expects a deficit of 186,000 tonnes this year and a shortfall of 369,000 tonnes in 2022, followed by surpluses in the two years after.

China’s massive purchases of refined copper have been the primary driver of the post-pandemic price rebound, but the Chinese push may be fading.

In 2020, China imported 4.4 million tonnes, up 1.2 million tonnes from 2019.

Barrick on track to achieve 2021 production targets, the company reported preliminary Q1 sales of 1.09 million ounces of gold and 113 million pounds of copper, as well as preliminary Q1 production of 1.10 million ounces of gold and 93 million pounds of copper, in line with their plan.

The average market price for gold in Q1 was $1,794 per ounce, while the average market price for copper in Q1 was $3.86 per pound.

Preliminary Q1 2021 copper production was 22% lower than Q4 2020 as expected. Copper sales were 5% higher than the previous quarter as Lumwana sold a portion of its stockpiled concentrate.

Barrick expects copper production in the second half of 2021 to be stronger than the first half, mainly driven by higher grades from Lumwana.

Caledonia closes off first quarter, Caledonia Mining recorded gross revenues of $25.7-million for the quarter, with higher revenues year-on-year thanks to a higher gold price, offset by lower sales as a result of lower production.

Caledonia reported net cash from operating activities of $2-million for the quarter. Cash from operations was adversely affected by increased working capital, in particular higher amounts due for gold sales. 

The responsibility for making payments for gold deliveries from the Blanket gold mine, in Zimbabwe, has moved from the Reserve Bank of Zimbabwe to its gold refining subsidiary Fidelity Printers and Refiners.

The company believes this move will streamline and improve receiving payments for the gold it produces and says this new system is operating well.

Caledonia paid dividends in the quarter of $0.11 a piece which is a 46.7% increase year-on-year and the quarterly dividend increased by 9% to $0.12 a piece in April. 

Zambia denies shutting KCM, reports emerged that KCM’s mining operations had been stopped at Konkola Deep underground pit and other KCM plants because of a lack of funds to develop new mining areas.

It is noted that at no point has operations been halted or even stopped and that production has been continuous throughout.

Zambia handed control of KCM to a provisional liquidator in May 2019, triggering an ongoing legal dispute with Vedanta.

Konkola Copper Mines is currently operating and there are no plans to put it on care and maintenance.

Zambia’s economy is heavily reliant on mining, making the sector highly politicised especially as the country heads into a general election in three months’ time.

With copper prices at a ten-year high Africa’s second-largest copper producer which defaulted on part of its sovereign debt in November stands to gain from ramping up production at key mines.

DRC President visits KCC in recognition of investment, DRC President Felix Tshisekedi visited Glencore’s Kamoto Copper Company (KCC) in Kolwezi, yesterday, in recognition of the miner’s near $8-billion investment in the country.

KCC is a joint venture between Glencore and DRC commodity trading and mining company Gécamines, which conforms to the Responsible Minerals Assurance Process standard for cobalt as defined by the Responsible Minerals Initiative.

KCC represents a key part of Glencore’s investment in the DRC, with its modern infrastructure and a significant copper cobalt orebody, which the company states makes the operation a key component to achieving the global energy and mobility transitions.

Following its successful ramp-up in 2020, KCC is on track to achieve nameplate capacity of 300 000 t/y of copper and 30 000 t/y of cobalt production.

Portugal to send more troops to Moz, Portugal will send 60 more soldiers to Mozambique as part of a new cooperation agreement aimed at helping the southern African country to fight insurgency.

Sixty members of the Portuguese special forces are already training soldiers in Mozambique, following the deadly attack in March in the village of Palma, Cabo Delgado, in the northern part of the country.

The agreement, which is in place until 2026, allows Portugal to train Mozambican soldiers on fighting insurgency, sharing intelligence and helping the country using drones to track insurgents’ movement.

The US has also helped Mozambique with training of defence personnel to fight terrorism with the European Union preparing to send soldiers to Mozambique to help fighting insurgency.

Upcoming Public Holidays:
17th May 2021 – National Day of the Revolution and the FARDC (DRC)
25th May 2021 – Africa Day (Zambia and Zimbabwe)

“Some people feel the rain, Other just get wet”

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 33

Biggest one yet!  ArcelorMittal SA has just recently given out notice of yet again another steel increase for the month of May, the increase sitting at a staggering R2,250.00 per ton is the biggest one yet.

This will now be the fifth consecutive increase this year with a possible positive outlook in the third quarter where prices are expected to drop.

Along with increased fuel, electricity and labour hikes this won’t be the end of the dark road within the steel sector.

With material being so scarce in South Africa and constant price increases, will SA still be an important game player within the steel sector? Only time will tell.

Border updates, there has been an increase in hijackings at the Beitbridge border post and with the latest developments, Ekhuruleni police officers have been implicated as accomplices.

The National Traffic Anti-Corruption Unit (Ntacu) has slammed the brakes on a traffic and police officers’ syndicate, which has allegedly been hijacking trucks on major Gauteng transportation routes.

The investigation is ongoing and more arrests can be expected. The suspects are expected to appear in court soon.

This seems to be the only burning issue of this nature across Southern Africa borders.   

We would like to extend our deepest condolences to the family of the driver who tragically and unnecessarily lost his life in a robbery at Beitbridge recently.

Ever Given consequences being realised, not only has Egypt filed a multi-million pound compensation claim against the owner of the container ship but Suez Canal Authority has also estimated a $300 million bill for “loss of reputation” and an equal amount charged as a “salvage bonus”.

The responsibility for this massive mishap, that took at least 800 people and more than a dozen tugboats to correct, is now a ping pong between the Japanese vessel owner and the line operator Evergreen.

General Average (GA) was declared by the owner of the vessel which means that there is a potential of spreading the cost of significant expenses amongst shippers.

PowerChina hydro project delayed, work on the 2,400-megawatt facility had been scheduled to start in 2020, but yet another victim of the COVID-19 pandemic, this $4 billion hydropower plant has been suspended until towards the end of 2022.

This project awarded to General Electric Co. and Power Construction Corp. of China aims to ease electricity shortages to both Zambia and Zimbabwe will potentially be funded by domestic pension funds in Zambia and Zimbabwe.

Trade and Development Bank a Bujumbura which is a Burundi-based multilateral lender, has been appointed as the lead co-ordinator for financing the project.

A new coal player in Zim, Contango Holdings’ Lubu project in Zimbabwe, which comprises a substantial coking coal resource, ticks all the right boxes to deliver a financially lucrative business.

Lubu covers 19,236 hectares of the highly prospective Karroo Mid Zambezi coal basin which is located in the Hwange mining district in North Western Zimbabwe. 

Historically, around US$20 million has been spent on advancing the project, including the completion of a pre-feasibility study, resourced modelling and mine planning with test work to confirm the presence of thermal and coking coal.

Contango started as a shell company looking to acquire a near-term production asset rather than an exploration asset, and this led to its interest in and purchase of Lubu.

Having reviewed multiple assets, it was determined that Lubu was a project that could bring into production quickly without the need for years of geological work to validate it. With extensive geological work completed, there was no exploration risk involved in the asset.

ZISCO seeking new investors, Zimbabwe’s state-controlled iron and steel company ZISCO has invited new investors to help revive operations at the company that has been the target of interest from Indian and Chinese investors in the past.

ZISCO acting chairman Martin Manuhwa said earlier this week that the firm was again looking for new investors interested in resuscitating the company.

The successful investor would be expected to contract out at least 35% of engineering, procurement and construction business to the local community.

ZISCO owns an iron ore mining unit with an installed capacity of 2.16 million tonnes of ore a year as well as a wire products company.

Interested investors should submit their expression of interest by April 30. Successful investors would then be invited to participate in the bidding process for the funding.

CATL to acquire stake in Kisanfu, Battery maker Contemporary Amperex Technology (CATL) will be acquiring a stake in the Kisanfu copper-cobalt mine in the Democratic Republic of Congo for $137.5m.

According to the agreement, CATL New Energy will acquire 25% in China Molybdenum (CMOC) unit KFM Holding, KFM Holding owns a 95% stake in Kisanfu mine while the remaining 5% stake is held by the DRC Government.

The deal is expected to provide CATL with access to what is claimed to be one of the world’s largest, highest-grade undeveloped cobalt and copper projects.

Hunger threat, Almost 1-million people face severe hunger in northern Mozambique, where hundreds of thousands have fled Islamist militant attacks, the UN food agency advised earlier this week.

Islamic State-linked insurgents in March attacked Palma, a town in Cabo Delgado province next to gas projects under development by companies including Total and Exxon. All work in the region has since come to halt as the threat levels are at its peak.

The World Food Programme has noted that 950,000 people are now hungry in Mozambique and has appealed to donors for $82m to confront the crisis.

It seems that that the world has finally opened its eyes as SADC leaders all met in Maputo to discuss a way forward and to determine the response required to fight off the insurgents.

Zimbabwean President Emmerson Mnangagwa said the meeting also agreed to revive a so-called SADC brigade to intervene in the conflict.

It is not confirmed that Mozambique has agreed that SADC forces would help the government fight the Islamic State-linked insurgency.

Under SADC rules, a member state must make an official request for the group to deploy the brigade.

SADC leaders are scheduled to meet again on April 29 to discuss the issue.

“Sticks in a bundle are unbreakable”

Trade Winds bimonthly update volume 32

Another month another increase!  Last month the steel mills within South Africa sent out notice of price increase effective 1 April and unfortunately this is no April Fool’s joke.

With the prices going up in the region of 5% this time round and the expectancy of another increase for May, business is taking a hit in all areas as it’s becoming more and more difficult to secure consistent pricing with some prices only being valid for 1 day!

The oil base price has also increased which has affected the plastics sector and we are expecting further increases on a month to month basis if this continues.

Border updates, there has been an unfortunate event at Beitbridge border post where a driver was shot in the head.

The dangerous security situation that develops at South Africa’s land border with Zimbabwe whenever there’s congestion at Beitbridge has resulted in one fatality and a truck driver fighting for his life after he was shot in the head.

The shooting once again highlights the danger to which truck drivers are exposed when waiting in queues at Beitbridge, especially south of the border.

There is lack of solid information as to why the northbound queue through the notoriously blocked-up border is yet again an issue also contributes to the fear and uncertainty truckers have to put up with at Beitbridge.

Ever Given finally freed, news broke from Egypt this past Monday morning that Ever Given is a float. This came after dislodging efforts were ramped up over the weekend, with at least 15 tugboats working the stricken vessel while dredging was under way.

The 400 meter long juggernaut of a container ship had been grounded in the Suez Canal for six days prior to its release and in turn blocking over 300 hundred ships during this time.

This event is expected to have a major impact on the economy in the coming weeks and months.

Ivanhoe looking to advance expansions, Ivanhoe Mines are looking to advance the expansions at their Kamoa-Kakula plant in DRC which include accelerating the Phase 3 expansion at the Kamoa-Kakula copper mine beyond Phases 1 and 2.

The other is fast-tracking additional hydropower upgrades in the DRC to ensure abundant clean and renewable electricity for all subsequent expansions at Kamoa-Kakula. The management team is also evaluating a potential, state-of-the-art, direct-to-blister smelter that could bring numerous economic benefits and further reduce the project’s Scope 3 emissions.

Democratic Republic of Congo is blessed with some of the world’s greatest hydropower potential. Hydro-generated electricity which can also potentially be supplemented by solar power.

The company will now look to further increase production at the Kamoa-Kakula copper joint-venture and to accelerate the Phase 3 concentrator expansion from 7.6 million tonnes per annum to 11.4 million tonnes per annum.

Together with their partner Zijin Mining, Phase 2 has already been accelerated and they are hopeful to begin production in Q3 2022 which will bring copper production to approximately 400,000 tonnes per year and with phase 3 being brought in thereafter the annual copper production is expected to rise to 530,000 tonnes per year.

ZCDC on brink of collapse, Zimbabwe’s state-owned diamond miner is reportedly on the brink of collapse after president Mnangagwa allowed Chinese mining giant Anjin to resume operations whom the late former President Robert Mugabe forced the closure of seven mining companies, including Anjin in 2016, and went on to merge their assets into the ZCDC.

President Emmerson Mnangagwa reversed that move in a bid to restore productivity in the diamonds sector and develop the country’s ailing economy. 

The Anjin Diamond Mining Company contributed about $200m to Zimbabwe’s economy before it was forced to halt operations.

ZCDC has reportedly stopped mining in four of its concessions and abandoned the exploration of three other sites as it currently faces challenges that are threatening its viability.

FQM spends big in 2020, Zambia’s largest mining company, First Quantum Mining is full steam ahead in its mission to incorporate more local people in its supply chain to strengthen Zambian-owned businesses and boost the local economy.

The mining giants procured US$1.65 billion of goods and services from companies registered in Zambia in 2020, which represents 85% of the total expenditure by its, Kansanshi Mine in Solwezi and Sentinel in Kalumbila.

More than 2,500 locally registered businesses benefited from mine contracts in 2020 alone.

It is noted that the goal of FQM’s pro-Zambian approach is to build and stimulate sustainable growth for local businesses in and around its Kansanshi Mine in Solwezi and Sentinel Mine in Kalumbila as well as the country at large.

ZCCM-IH now has complete ownership of Mopani, shareholders in Zambia’s ZCCM-IH have overwhelmingly supported its acquisition of a 90% stake in Mopani Copper Mines.

Glencore agreed the sale of its majority stake in Mopani to ZCCM-IH in a $1.5 billion deal earlier this year.

The general meeting vote on the resolution was the last steppingstone towards the completion of the transaction and ZCCM-IH now holds 100% ownership of Mopani, with the increased ownership, ZCCM-IH will now be an active participant in the global industry.

ZCCM-IH plans to boost the copper output from 34,000 tonnes to 150,000 tonnes and by accomplishing this they are looking to find a new investor for Mopani by the end of the year.

Catastrophic events as Islamic State attack near Total, dozens of people were attacked and killed in a raid by the Islamic State in Mozambique, the attack began on March 24 in the northern costal town of Palma close to Total’s Liquefield Natural Gas Project, a plant that the IS has been trying to get to.

Whilst hundreds of people were evacuated by boats to the provincial capital of Pemba, many people remain unaccounted for.

The attack came soon after Total announced the resumption of work at the plant, no work had been done this year due to lack of security in and around the area.

Total has now said that it would reduce the number of workers on site going forward but for now no work will be done.

The terror attacks have so far claimed over 2,000 lives and about 1.3 million people face security crisis. Nearly 670,000 people have been displaced.

The world is starting to take a closer look, but no real aid has taken place, Mozambique clearly needs help and it’s time that its surrounding allies intervene with help from abroad.

We would like to take this time to wish our customer’s a Happy and peaceful Easter, and to enjoy their time with their families and most importantly to stay safe.

“The laughter of a child lights up the house”

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”