Zambia government is upbeat that its support for the mining industry and strong copper prices can drive growth in the country’s copper production for this year, despite the ongoing power shortages, BMI Research has said.
According to data published by Zambia’s Central Bank, copper production reached 362 000 t by June 30, down slightly from the 367 000 t produced in the first half of 2016.
Even though no details have been given by the Zambian authorities for this decline, but it is likely that the country’s ongoing power supply problems have been the key constraint on copper mining activities.
“We are positive on Zambian copper and maintain our forecast of 7 percent growth this year as Zambian President Edgar Lungu remains supportive of the sector, and rising copper prices incentivize domestic miners to ramp up production during the second half of the year,” BMI Research added.
Ongoing power shortages resulting from the country’s dependence on hydropower and rising water tariffs are the key risks facing the Zambian mining sector.
In August, two of the country’s biggest copper producers, Glencore and First Quantum Minerals, were forced to reduce power at key operations, owing to tariff disputes with electricity provider Copperbelt Energy Corporation.
However, good rainfall and rising dam levels in the country will ease some of power shortages experienced in the last quarters.
Another key driver of strong Zambian copper production this year will be the positive trajectory of prices in 2017 relative to last year.
Since falling to a low of $4 500/t in June last year, copper prices have risen over 57% to $6 810/t in August owing to strong demand from Asia.
“While it is possible that prices may unwind from current levels towards the end of the year, we think the gradual uptrend over the last 12 months will bode well for mining activity in Zambia,” the research firm added.