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Trade Winds bimonthly update volume 48

Steel price increases on the way? After our last Trade Winds update advising of a steel increase of R1200.00/Ton set for next week, rumour has it that the two other major steel mills are increasing their prices as of next month.

Prices are increasing, demand remains high but with ArcelorMittal’s care and maintenance closure at their Newcastle Plant, supply has dipped and is expected to continue to be low throughout Q4 and into Q1 next year.

The care and maintenance is expected to start from 22nd November 2021 and run into early next year.

Whilst the strike remains in place at the Vanderbijlpark plant there is little to no disruption at the moment.

Plastics, HDPE, Rubber and PVC have once again climbed in pricing due to international force majeures as well as the rising price of oil which directly fuels the raw material price of the abovementioned products.

Border updates, Beitbridge is currently recording preclearance times that have not been seeing in decades.

According to the latest GPS data received from the once heavily congested transit, it is now taking less than 12 hours for a truck to pass through the border with the latest on-average processing times as follows:

  • Four hours from Zimbabwe into South Africa.
  • Eight hours from South Africa into Zimbabwe.

To put it into perspective, at the Kazungula Bridge across the Zambezi between Botswana and Zambia, processing still takes longer than 24 hours on average however, the difference is that Kazungula is a single-window one-stop border post compared to Beitbridge which isn’t.

Closer comparison reveals that at Kazungula it takes up to 25 hours for northbound trucks entering Zambia.

Where week-long waiting queues had been the norm up until early October, the speed in which cargo is now being processed at Beitbridge, is simply due to transporters adhering to preclearing procedures. If trucks arriving at the border with documentation not being in order, they are then set to a truck yard where they are then marshalled towards a holding area.

Fines of R20 000 had been recently introduced by the SA Revenue Service for non-compliance with clearing procedures.

This is great news for importers, exporters and everyone involved at the border as the notorious congested border crossing is now a free-flowing port.

Truck drivers’ strike struck off the roll, the imminent truck driver struck has been cooled as government has stepped in.

The South African Transport and Allied Workers Union (Satawu) has welcomed government’s plans to crack down on foreign drivers who are working in the country illegally.

The Departments of Labour, Transport, Police and Home Affairs recently announced that they may change legislation to make it tougher for non-South African workers in the sector which includes the prohibition of foreign nationals from operating South African registered trucks using foreign professional driving permits.

It follows last month’s blockading of several national highways by striking truck drivers.

Load-shedding to be eased by energy investments, as new electricity generation capacity comes online, energy investments are said to help overcome the debilitating load-shedding that the country is currently experiencing.

Cyril Ramaphosa has said that energy continues to be an area of growth in South Africa as the 25 preferred bidders in the fifth round of the Renewable Energy Independent Power Producer Procurement Programme were together, expected to invest around R50 billion into the economy.

South Africa has recently secured an initial commitment of around R131 billion to fund a just transition to a low-carbon economy by investing in renewable energy, green hydrogen and electric vehicles.

The country has been once again rocked by power cuts this past week with stage 4 load-shedding disrupting the day to day lives of citizens and businesses.

Airfreight on the rise, latest figures show on airfreight that year-on-year capacity for October has increased by 17% with a three percentage point drop-off in dynamic load for the same year on year period, with take-up currently standing at 68%, an increase of 2% from the previous month suggesting that demand is slowly catching up.

Interestingly flights ex-Asia Pacific-Europe remained virtually full, lifting rates by a further 20% over September 2021, while Apac-North America rates reached a double-digit level per kilo. Overall, international rates rose 10% month over month.

Although capacity for air cargo is increasing, neutral consolidator CFR Freight says available space is limited and that rates are regularly upsold at the time of booking due to excessive demand.

It is recorded that rates have increased by up to 37% at the end of September compared to the previous year.

Maersk signs transport deal, Vestas, a Danish wind turbine manufacturer has gone into a joint venture with Maersk in a long-term strategic partnership for all its containerised transport needs which in turn will ensure that Vestas gets direct access to container capacity at a fixed price

The deal includes door-to-door transport from the company´s suppliers to their factories and service warehouses, as well as containerised site parts and transport equipment.

Airfreight shipments are included in the deal.

Non-containerised road transport and outbound shipments will continue to be managed by DSV and other partners.

Metal sector to continue its recovery into the new year, S&P Global Market Intelligence states that the metals sector is set to continue its rebound from the effects of the covid-19 pandemic through 2022. 

Pent-up consumer spending, government stimulus efforts and the accelerating energy transition are all contributors to the continuation of driving demand, prices and exploration budgets.

The upswing in demand growth will drive prices higher across a range of metals in the medium term and there is a projection of increase in iron ore price volatility into 2022 due to the combination of underlying market tightness, potential supply disruptions and project delays as well as global supply and power constraints.

Copper on the other hand is expected to have a demand from solar and wind energy generation to reach 852,000 tonnes by 2022 and the growing electric vehicle market to account for 1.1 million tonnes in 2022.

Margins are also expected to remain healthy in 2022 for most metals, following the high prices and relatively steady costs experienced by producers in 2021.

Gold price climbs to 5-month peak, Gold kept its hot streak going this past Wednesday, rising by 2% to a five-month high after a surge in US consumer prices last month elevated gold’s appeal as an inflation hedge.

Spot gold was up 1.1% at $1,852.36 per ounce, having earlier hit its highest since June 15 at $1,857.09.December gold futures rose 1.4% to $1,856.70 per ounce.

Zimplats planning major expansion, Implats’ Zimbabwe-based unit Zimplats has announced plans to invest a total of US$1.8 billion over the next seven years towards mine expansion, as well as the establishment of a base metal refinery.

The bulk of the funds, amounting to US$386.2 million, will go towards the development of Mupani mine, which is a replacement for the depleting Rukodzi, Ngawarati and Mpufuti mines, whilst the base metal refinery plant will cost US$200 million.  

The miner also plans to set up a 110 MW solar power plant at a total cost of US$201 million.

An expanded smelter will cost US$280 million and will see smelting capacity increased from 132 kilotons to 380 kilotons of smelted concentrators, while the development of Hartley mine will cost US$289 million.

The project will also enhance the company’s capacity to smelt its own resources and for local third parties.

Zambia implements tax breaks, Zambia will implement tax breaks for mining companies, with mining royalties to be deductible from income taxes, something the mining companies have complained about that not being able to deduct royalties resulted in double taxation and deterred investment.

Finance Minister, Situmbeko Musokotwane, did not discuss any changes on the royalty rates. Royalties are currently ranging from 5.5% to 10% which is dependent on the copper price.

Minister Musokotwane also said that the government will cut its budget deficit target, and that debt restructuring negotiations with creditors are expected to conclude in early 2022.

Gemfields finds largest emerald at its Kagem Mine, Gemfields has found a emerald weighing in at a 7,525-carat (1,505g) named Chipembele, which means “rhino” in the local dialect of Bemba.

Whilst there are no official records, it is extremely rare to encounter a gemstone weighing more than 1,000 carats and only a couple of dozen unique enough to deserve their own name.

The last time a comparable emerald was found was in 2018, when the same mining company unearthed a 5,655-carat emerald, name Inkalamu, meaning “lion”. Prior to that, a 6,225-carat dug up a emerald in 2010, which was named Insofu – Bemba for “elephant”.

“You are today where your thoughts have brought you; you will be tomorrow where your thoughts take you”