NOMSA NKANA, Lusaka
THE price of copper, Zambia’s major foreign exchange earner, is projected to hit US$7,000 per tonne before year-end as demand by the world’s largest consumer, China continues to mount.
According to Citi Research, demand by China due to a pick-up in industrial activity coupled with the anticipated US$500 billion infrastructure programme in the United States of America (USA) will trigger the projected increase in the price.
The report also notes that Zambia has partially bucked the supply-deficit trend, and its copper production capacity has improved over the last few years despite the worst effects of the recent global mining slowdown.
Zambia is targeting to produce over 800,000 tonnes of copper this year.
Prices of copper on the London Metal Exchange (LME) are currently hovering around US$6,000 tonnes although in the early hours of yesterday, the price of the commodity slipped by 0.2 percentage point to US$5,995 a tonne.
“Driving the copper price are a pick-up in global manufacturing activity, and the research firm is hopeful about President Trump’s much talked-about US$500 billion infrastructure programme in the United States of America (USA),” Citi Research said.
Despite the increase in demand, Citi Research notes that supply from copper mines is under threat.
The organisation says there have been disruptions to supply in recent months that have kept several thousand tonnes of copper off the market every single day, citing prolonged strikes at mines in Chile and Peru, the world’s two largest copper-producing nations, and a stoppage in production at Indonesia’s massive Grasberg Mine.
“In the longer term, there is [a likely] shortage of new copper-production capacity in the world, and this poses a far more serious challenge to supply,” the report says.
Citi Research also says the cutback in capital expenditure of recent years has gutted the copper project pipeline for much of the remainder of the current decade, and will set the market up for the most sustained price rally since 2010.
Meanwhile, Mining for Zambia notes that the current positive outlook for the copper price is a timely reminder for Zambia’s mines to grasp the opportunity and invest in new production, and for the government to create an investor-friendly policy climate that encourages those decisions.