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Copper price hits a level last seen in 2011

April 26, 2021by Nicholas Kabaso
  • The mining sector is in the spotlight this morning following the death of an illegal miner shot by police at Mopani Copper Mines in Mufulira on Friday. Police were said to be struggling to push back the illegal miners before one was killed. Mines Minister Richard Musukwa condemned the illegal miners, locally known as Jerabos is the strongest possible way, saying that their conduct would not be tolerated.
  • However, he did say that the loss of life was regrettable, adding that the police should not have used live ammunition but perhaps used non-combat tactics during the crowd control. The minister went on to add that the government has provided proper mechanisms for youth inclusion in mining activities, and thus it would not condone illegal activities.
  • On a more positive note, Zambia is expected to have a bumper maize harvest this year, according to the Minister of Agriculture Michael Katambo, this despite flash floods recorded in most farming areas.  The minister added that farmers should only sell surpluses to ensure household food security. “Household food security is key, and farmers should only sell that which is surplus to them and leave something for home consumption this will also ensure that we attain National food security,” he said.
  • On the political front, Lusaka Times reported the following – President Edgar Lungu and his Democratic Republic of Congo (DRC) counterpart Felix Tshisekedi have held talks in Kinshasa and discussed a wide range of issues of common interest. President Lungu said Zambians and Congolese share a lot of similarities among them culture, traditions and others. He said at the African Union arena building that the discussions were fruitful as they bordered on issues of enhanced cooperation in order to increase economic development in both counties.
  • Both the DRC and Zambia share a rich abundance of copper, and thus developments this morning will be of great interest to both countries.
  • Copper prices have ramped up this morning, with the 3m LME contract hitting a level last seen in 2011 amid a broad rally in industrial metals during the Asian session. The underlying driver is the expectation that a global economic recovery is underway and that supplies of the red metal will be in deficit. Copper is integral in the world’s green-energy transition, which is gaining momentum as countries around the world roll out more aggressive climate targets.
  • On the supply side, Chile is the focal point this morning. Chile is the world’s largest producer of copper, and thus any hiccup’s here are reflected immediately in the price of copper. Chile port workers have called for a strike in protest to the government’s attempt to block a third round of pension fund withdrawals. If the strike goes ahead, it will choke the logistical process making the export of copper almost impossible.
  • In terms of FX markets, no change to the underlying bearish bias which persists in the USD market, with the trade-weighted USD still firmly on the defensive. Ahead of the FOMC decision and statement this week, speculation has intensified that the Fed will persist with its ultra-accommodative monetary policy and will not seek to taper any time soon. This very loose stance is enough to ensure that the USD continues feeling the debasing pressure of such a policy, while the anticipated rise in inflation amid high twin deficits only cements the argument against the USD. Technically, although the USD may be oversold in the short-term, it holds the potential to weaken a little further.
  •  Locally, we expect a measured start to the session given that there is a distinct lack of economic data out today which usually sets the tone. We are also entering the week where month end commitments fall due and this may also impact price action in terms of the Kwacha.
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Nicholas Kabaso

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