- Speaking to reporters yesterday, Mines Minister Richard Musukwa stated that Zambia’s copper production rose to a record high of 882,061.46 tonnes in 2020, from 796,430.77 tonnes produced in 2019. Large-scale production increased to 868,670.46 tonnes in 2020, compared with 787,698.77 during the previous year. The Minister indicated that for 2021 Zambia aims to produce more the 900,000 tonnes of copper and has a long-term goal of exceeding one-million tonnes in annual production. A global shift towards electric cars, which use more copper than cars using traditional combustion engines, is expected to boost production of the metal, and despite the coronavirus pandemic, the outlook for the Zambian mining sector is positive, according to Musukwa.
- LME 3m copper hit an intra-morning high of $9342/tonne a level last seen in August 2011 driven by expectations of strong economic growth as the Fed affirmed the need for an accommodative monetary stance. Adding weight to the move is the fact that inventories continue to fall. The latest reading of LME Inventories for copper come in at 73450 tonnes the lowest since December 2005, while Yangshan bonded copper premiums have risen to $77/tonne which show better demand for imported copper into top consumer China.
- Stateside, as we approach the end of the week, the focus is turning squarely on to the stimulus package that will be voted on by the House of Representatives. Given the Democrat majority, the bill will pass and head to the Senate for the next round of approvals. That means that the bill could be ready for implementation by the end of next week, after which it will rapidly be deployed. March will therefore be a powerful growth month which set the stage for a strong economic performance through Q2 and into H2. The upside to this is that it will bolster the economic recovery. The downside is that it imposes a higher debt burden that will at some point need to be paid back down.
- Vaccine manufacturers Pfizer, Moderna and J&J have committed to boosting their supply of vaccines to the US in the coming weeks to alleviate any constraints in the vaccination drive. This will serve to further support the recovery and bolster economic confidence for the future. The worst is now over and it is believed that the rollout of the vaccines will prevent a third wave from materialising with the same devastating effect on lives lost.
- Finally, it is important to acknowledge Fed Chairman Powell’s testimony to the Senate Banking Committee yesterday. He was sure to confirm that the Fed would remain accommodative while it targeted full employment. Inflation and asset price concerns were downplayed by the Fed Chairman as he focused on the need to continue supporting the economy. The common held belief amongst policy makers is that austerity measures and removal of accommodation should only materialise once the economic recovery has become well and truly entrenched.
- Shifting to the FX markets, the Kwacha remained on the back foot as a broader bearish bias remains entrenched. Although the USD has paused its slide, it remains on the defensive for the time being. The bias remains to the downside as Fed Chairman Powell is set to testify before the House Financial Services Committee in the second of his testimonies. Barring the Q&A which may force some comments out of him, the message will be the same and the USD is therefore unlikely to experience much of a sell-off on the back of his comments. Furthermore, with stock markets looking a little less positive this morning, the potential for some rotation to safety could provide a backstop to the USD that might’ve otherwise eroded a little weaker.
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