Please wait, loading...

 

ZESCO signs a bulk-supply agreement with Copperbelt Energy

June 23, 2022by Nicholas Kabaso
Please click here to access the full Market Watch

Local Market Commentary

  • Minister of Mines Paul Kabuswe yesterday said that Zambia needs to hold a bigger stake in new mines and that local communities should benefit more from the mineral value chains. According to Kabuswe, the Zambian government is planning to increase the state’s shareholding in new mines to ensure that Zambia maximises its benefits from the sector. Kabuswe added, “Going forward, I don’t think there will be a mine where Zambia will own less than 20% of shares. Those days of 10% shareholdings are gone.” The Zambian government needs to have a golden share in new mines which would give it controlling voting rights, according to the minister. Note that mining investment arm ZCC-IH holds less than 50% shares in key mining operations and a 20% stake in the Kansanshi mine which Canada’s First Quantum Minerals own.
  • Meanwhile, the Lusaka Securities Exchange yesterday announced that state-owned power utility ZESCO had signed a bulk-supply agreement with Copperbelt Energy. Note that Copperbelt Energy distributes electricity to mines in the country’s northern parts. The deal is effective from April this year and succeeds an agreement that had expired in March 2020. Moreover, it marks a thawing of relations after the two companies had constantly been involved in disputes over the past two years amid no signed agreement.
  • In the base metals market, concerns emanating from the US Fed surrounding the potential for slower US economic activity and a rise in Chinese COVID-19 cases have pushed the price of copper to a 16-month low this morning.  The 3m LME benchmark is currently trading some 1.54% lower this morning at $8633.00/tonne. Technically, the next major technical support area comes in around $8000.00/tonne where we have multiple highs and lows forming strong congestion.
  • Moving over to the US, the PMIs scheduled for release today are expected to reflect a deteriorating economic outlook despite robust economic growth at present. While many respondents have continued to report a tailwind in the form of pent-up demand from the coronavirus pandemic, companies are facing mounting challenges from high inflation and rising interest rates, as well as persistent supply chain delays and labour-market constraints. Despite these headwinds, it is worth noting that business activity continues to expand, albeit at a slower pace. Looking ahead, the PMI numbers will be watched closely for any new information on supply-side inflationary pressures as it could bolster the argument in favour of aggressive tightening by the Fed.
  • In the FX markets, although off its recent highs, the USD remains supported for now with so much uncertainty still doing the rounds. Equity markets continue to face the triple threats of high energy prices, soaring inflation and aggressive monetary tightening. Recessionary fears escalate with each passing day, and the USD will retain a safe-haven bid, especially with the persistent depreciation of the JPY in recent months. The overnight recovery in the JPY may be a function of improved short-term sentiment in global equities, but the risk is that any JPY rally fades. Meanwhile, the EUR and the GBP remain consolidative for now and just off their recent lows as they look for the next catalyst to drive directional momentum. EUR continues to trade just above 1.0550, while the GBP is trading around 1.2250 this morning as they trade comfortably within the week’s range.

 

Rand and International FX Commentary

  • Minister of Mines Paul Kabuswe yesterday said that Zambia needs to hold a bigger stake in new mines and that local communities should benefit more from the mineral value chains. According to Kabuswe, the Zambian government is planning to increase the state’s shareholding in new mines to ensure that Zambia maximises its benefits from the sector. Kabuswe added, “Going forward, I don’t think there will be a mine where Zambia will own less than 20% of shares. Those days of 10% shareholdings are gone.” The Zambian government needs to have a golden share in new mines which would give it controlling voting rights, according to the minister. Note that mining investment arm ZCC-IH holds less than 50% shares in key mining operations and a 20% stake in the Kansanshi mine which Canada’s First Quantum Minerals own.
  • Meanwhile, the Lusaka Securities Exchange yesterday announced that state-owned power utility ZESCO had signed a bulk-supply agreement with Copperbelt Energy. Note that Copperbelt Energy distributes electricity to mines in the country’s northern parts. The deal is effective from April this year and succeeds an agreement that had expired in March 2020. Moreover, it marks a thawing of relations after the two companies had constantly been involved in disputes over the past two years amid no signed agreement.
  • In the base metals market, concerns emanating from the US Fed surrounding the potential for slower US economic activity and a rise in Chinese COVID-19 cases have pushed the price of copper to a 16-month low this morning.  The 3m LME benchmark is currently trading some 1.54% lower this morning at $8633.00/tonne. Technically, the next major technical support area comes in around $8000.00/tonne where we have multiple highs and lows forming strong congestion.
  • Moving over to the US, the PMIs scheduled for release today are expected to reflect a deteriorating economic outlook despite robust economic growth at present. While many respondents have continued to report a tailwind in the form of pent-up demand from the coronavirus pandemic, companies are facing mounting challenges from high inflation and rising interest rates, as well as persistent supply chain delays and labour-market constraints. Despite these headwinds, it is worth noting that business activity continues to expand, albeit at a slower pace. Looking ahead, the PMI numbers will be watched closely for any new information on supply-side inflationary pressures as it could bolster the argument in favour of aggressive tightening by the Fed.
  • In the FX markets, although off its recent highs, the USD remains supported for now with so much uncertainty still doing the rounds. Equity markets continue to face the triple threats of high energy prices, soaring inflation and aggressive monetary tightening. Recessionary fears escalate with each passing day, and the USD will retain a safe-haven bid, especially with the persistent depreciation of the JPY in recent months. The overnight recovery in the JPY may be a function of improved short-term sentiment in global equities, but the risk is that any JPY rally fades. Meanwhile, the EUR and the GBP remain consolidative for now and just off their recent lows as they look for the next catalyst to drive directional momentum. EUR continues to trade just above 1.0550, while the GBP is trading around 1.2250 this morning as they trade comfortably within the week’s range.

Nicholas Kabaso

ABC Unit Trust Head Office
Pioneers of Unit Trusts in Zambia.
Corner of Nasser/Church Roads,
Post box 37107, Lusaka, Zambia
ABC Unit Trust Contact Details
Contact the Pioneers of Unit Trusts in Zambia.
GET IN TOUCHABC Unit trust Social links
Talk to us
ABC Unit TrustHead Office
Pioneers of Unit Trusts in Zambia.
ABC Unit TrustContact Details
Pioneers of Unit Trusts in Zambia
GET IN TOUCHABC Unit Trust
Pioneers of Unit Trusts in Zambia

Copyright by ABC Asset Management. All rights reserved.