By Thomas Lassourd and David Manley, Natural Resource Governance Institute
Probably the most dramatic aspect of the early 2015 global economy is the historically low level of commodity prices. Crude oil prices have fallen by 50 per cent since June. But oil is not the only commodity that has stumbled. Since their peak in February 2011, copper prices have dropped 38 per cent and iron ore prices have fallen a staggering 63 per cent.
Predicting the future is a dangerous occupation. Most observers – and the market -did not foresee the dramatic fall that has occurred. Some analysts and the forwards market expect prices to go even lower, before increasing to $65 per barrel in the next two to three years, while others believe prices will slowly rise to $100 per barrel within the same time frame. Read more
Zambia’s plans to make companies repatriate foreign currency export earnings back to Lusaka are part of an effort to crack down on tax avoidance, particularly in the mining sector.
But are they going to be enough? Perhaps not, according to the country’s vice president Guy Scott. Read more
Chile is concerned.
It is the world’s top copper producer; copper makes up more than half the value of its exports and 15 per cent of its GDP. Windfalls from sales of the red metal are squirreled into sovereign wealth funds, to allow countercyclical spending on a rainy day. The last thing Chile wants is for copper prices to fall, as they have been doing lately – hitting an 18 month low this week. Read more
By Jude Webber and Jack Farchy
There’s no such thing as a free lunch, so the saying goes.
But a $200m-a-day lunch? That is about what a nearly three-week-old ports strike in Chile is costing in paralysed exports and imports, according to Chile’s Chamber of Commerce. There are some 9,000 tonnes a day of copper trapped in ports in the world’s top copper producing nation because of the stoppage. Read more
The Philippines appears to be on a trajectory of rapid growth, bolstered by expectations it will finally get an investment-grade credit rating this year and attract more foreign investments. But investors already doing business in the country worry that the economy’s new-found vigor could be dissipated by sluggish decision-making in government. Read more
Chile has such an open, export-orientated economy, it is well aware of how vulnerable it is to whatever else is going on in the world.
But as Sebastián Claro, a member of the central bank’s board, highlighted in a presentation on Tuesday, things are looking pretty good. Chile’s growth is expected to outstrip that of its trading partners for another year and though fluctuations in the copper price are expected, nothing too drastic looks to be on the cards. Read more
Herbert Wirth helped turn Poland’s KGHM copper miner into a global force thanks to the recent acquisition of Canada’s Quadra FMX – but will that be enough for him to retain his job?
Wirth’s term as head of the company is expiring and his running to keep his job but faces stiff competition thanks to the growing prominence of KGHM. He will be hoping that the treasury ministry-dominated board will remember the FMX deal when it votes on naming a new CEO this June. Read more
Codelco, the world’s biggest copper miner, is keen to stress it will be business as usual after the abrupt departure of Diego Hernández, its veteran CEO and a highly respected figure in the industry. Yet the shock decision could hardly have been taken at a more delicate moment. Read more
The Gulf is bidding to win a share of the fast-moving global copper trade.
The Dubai Gold and Commodities Exchange will launch a copper futures contract this week, offering investors arbitrage opportunities with the leading copper markets in London and New York, as well as Mumbai and Shanghai.
As Camilla Hall reports for the FT’s Middle East edition, the exchange plans to launch trading in 5-tonne, cash-settled $-denominated copper contracts on April 20. Read more
Herbert Wirth, the chief executive of Polish copper miner KGHM, has completed the biggest transaction of his life, the $2.9bn acquisition of Canada’s Quadra FNX – and now he hopes that markets will appreciate his company’s new heft.
“KGHM is undervalued,” he complained during an interview following the announcement of the completion of the Quadra deal. Read more
Shareholders in KGHM, Europe’s second largest copper miner, today rejected a share buyback that had been proposed by management, in what analysts see as a move to ensure that the government controlled company continues to be a cash cow.
KGHM’s fat dividends – likely to come to 3bn zlotys ($895m) this year - and a nascent minerals tax are crucial elements of the government’s attempt to drive down the budget deficit and public debt this year as Poland scrambles to stay in the good graces of ratings agencies and investors. Read more
A labour dispute in Indonesia that has brought production at one of the world’s largest copper and gold mines to a standstill and cost the company hundreds of millions in losses may well be over.
US mining giant Freeport McMoRan Copper & Gold has reached a deal with trade unions to return 8,000 striking workers to work after a three-month stoppage, Reuters reported on Tuesday. Read more
Thousands of miners stopped work at Freeport’s Indonesian operations this week, crippling the flow of copper and gold from a huge mine and resulting in empty cargo ships and millions in daily lost revenue for the government.
The pay dispute involves over 8,000 (and possibly up to 12,000) workers at the huge Grasberg mine, and may drive up global copper and gold prices. An eight-day strike in July cut production by 35m lb (15,876 tonnes) of copper and 60,000 ounces of gold. Read more
Chilean miners have been restless lately. First, it was the almost miraculour rescue of “the 33“. Then in January a month-long strike at Collahuasi, the world’s third largest copper mine, was the longest-ever at a major private mine in the South American country. Earlier this month, Chileans saw the first strike in nearly 20 years at Chile’s state-owned copper miner, Codelco. Now, strikers at Escondida, the world’s biggest copper mine, are entering their fifth day of stoppages, boosting concerns about supply and causing copper prices to spike in London. Read more
It’s a bleak few days for copper producers in Chile, which produces about a fifth of the world’s red metal. Union leaders at state giant Codelco, the world’s biggest copper company, say a strike called for Monday against painful restructuring plans and privatisation fears will be unprecedented in its support. Read more
The contest for Africa’s copper and iron ore is sometimes likened to the Great Game, as various powers vie for geopolitical and investment advantages on a volatile continent. This analogy is criticised because of its colonial nineteen-century overtones. But to do so misses a basic fact. The powers in today’s Game come from emerging markets and bypass established economies entirely.
This was confirmed on Tuesday when Jinchuan Group, one of China’s largest state-owned miners, started a bidding war with Vale, the Brazilian mining giant. Their target is a small South Africa-based company whose main asset is in the Democratic Republic of Congo. Read more
It’s amazing what the holidays can do to copper demand. When China took a break for lunar new year in February, imports of the red metal slumped to a two-year low, prompting a sell-off. But imports rose last month to 304,299 tonnes.
But do China’s imports of copper in March really indicate that demand is returning? Read more
As the copper price soared last year, driven by increased demand from construction and manufacturing as the global recovery got into its swing, producers of the orange metal were enjoying themselves.
London-listed Kazakhmys was no exception, as its results for the year to December showed on Tuesday – pre-tax profit climbed 55 per cent to $1.59bn, with earnings per share more than doubling to $2.72. With a $2.7bn credit facility from China Development Bank in the bag, the company is set to press ahead with a “significant capital expenditure programme” to chase new projects in Kazakhstan and Kyrgyzstan. So why do investors appear so wary? Read more
The rise of copper prices to a record of $10,000 per tonne is both a blessing and a curse for Chile, the world’s largest copper producing nation.
Copper is the backbone of the national economy and the chief source of the government’s much lauded policy of saving for a rainy day, since excess profits are banked in a special fund to be called upon in times of emergency. But copper prices have pulled the peso to highs against the dollar not seen since the central bank announced a $12bn currency market intervention programme in January, and that is bad news for exporters. Read more
By Alfred Liu of mergermarket
Chemicals group Sinochem may be preparing a massive bid for PotashCorp, but Chinese companies aren’t only interested in Canada’s biggest companies. On Friday, China’s largest producer of nickel and cobalt, Jinchuan, agreed to buy a Canadian metals explorer for a fraction of the price that Potash could fetch.
That shows the many levels at which Chinese companies are expanding – thanks to their new-found wealth, their keenness to secure raw materials and technology, and the government’s “going out” policy, which encourages domestic players to push overseas. Read more