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Mining minister predicts growth in production

April 21, 2021by Nicholas Kabaso
  • Local news flow was on the thin side yesterday however the international markets as always provided a smorgasbord of influences and headlines.
  • Internationally, Gold and Bitcoin have diverged; both are seen as an alternative store of value but have behaved somewhat differently recently. Gold has managed to notch up gains clearing the $1780.00/oz mark, while Bitcoin has tumbled sharply, extending the losses seen after touching fresh highs recently. While Gold provides refuge in times of uncertainty, the jury is still out on Bitcoin even though there is more mainstream acceptance lately. We mention this in today’s note because there is increasing adoption of cryptocurrencies across the region. Investors have divergent views as to first off, whether or not it is an asset class, and secondly, what the prospects for returns actually are.
  • Moving over to the United States, in response to the Biden administration’s infrastructure plans, Senate Republicans will produce their own counter-proposal to Biden’s $2.3trln plans this week, but it is likely to be less than a third of the size. Some speculation that the Republican offer will be somewhere in the region of $600bn and would come accompanied with an idea on how it will all be funded. The concept of user-pay principle has been touted and this may appeal to fiscal hawks, but in essence amounts to yet another kind of “soft” tax on the private sector. This stimulus package is essential for commodity producers across the globe, given the amount of raw materials required to fulfil the scope of the infrastructure plan. Zambia has copper and cobalt that will be needed in abundance, thus supporting both tax revenue and hard currency earnings.  
  • This brings us to the performance of copper which is the staple hard currency earner for Zambia given the subdued earnings from tourism.
  • Copper fell yesterday as short-term traders use the resurgence of COVID-19 infections as a reason to book profits on long positions. The pullback has been slight as the weaker USD has provided a limit for how much copper could fall. As of 05;10 local time the 3m LME benchmark has recovered somewhat, up by 0.2% at $9340/tonne. 
  • Zambia has predicted copper output rising in excess of 1 million tonnes by 2024. The Mines Minister Richard Musukwa was quoting this figure at a presentation to lawmakers in Lusaka yesterday. He added that he believed the number was conservative.
  • Looking at the day ahead we have a very similar outlook to yesterday with data both locally and internationally on the thin side. Stock markets around the world have corrected lower and overall levels of risk appetite have subsided. The USD has been a direct beneficiary of this dip in mood and recovered off its lows. Short-term technical indicators have improved and are turning higher, and a near-term bounce is possible. Some concerns are emerging over India’s massive surge in Covid-19 infections and its ability to contain it in such a densely populated country. It has implications for the region, even though India is vaccinating as fast as it can.
  •  The Kwacha remains under pressure for now however this may fade as vat payments due this week result in a liquidity draw supporting the local unit
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Nicholas Kabaso

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