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”
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”