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”