COPPER REFINING
Refined copper production will gradually contribute more than raw materials to Zambia’s economy
Photo by: Bloomberg
Zambia will remain one of the fastest-growing refined copper producers in the world over the coming years, owing to strong domestic smelting capacity, rising mine output and continuing government support, according to economic research company BMI Research, a member of the Fitch Group.
As the copper mined in Zambia is refined locally before being exported, Zambia – unlike other markets in the region – will remain a regional player and an important global player in refined copper, BMI notes in its Industry Trend Analysis titled ‘Positive Refined Copper Outlook Ahead For Zambia’.
With an estimated output of 582 000 t of refined copper this year, Zambia’s downstream copper production is the largest in Africa, ahead of other competing copper producers such as the Democratic Congo Republic and South Africa.
BMI further forecasts Zambian refined copper production to increase from 582 000 t in 2018 to 865 000 t in 2027, averaging a solid production growth of 4.5%, the fastest of any major global producer, except for India. “As a result, we expect Zambia to jump from the tenth-largest refined copper producer in the world to eighth largest over the same period.”
BMI further suggests that Zambian refined copper production will be driven by a number of modern smelters at key operations. Zambia has a total of four copper smelting operations, giving it a combined smelting capacity of up to 1.2-million tons of refined copper a year, the largest in Africa.
Key players active in the domestic copper market include diversified mining company Vedanta Resources, Canadian metals and mining company First Quantum Minerals (FQM) and diversified miner Glencore, all of which have ramped up investments in developing downstream operations over the past decade.
For instance, Vedanta’s Konkola copper mine Nchanga smelter was commissioned in 2008, while the Mopani mine smelter was commissioned in 2006 and underwent a rebuild in 2014, BMI says.
Most recently, FQM invested more than $800-million to develop the Kanshanshi smelter, which came into production in December 2014, with a capacity of 300 000 t/y.
BMI’s forecast for Zambian copper mine output to witness considerable growth this year will also feed into downstream services, further supporting short-term refined production. “Our outlook for Zambia’s mining sector in 2018 remains positive, as copper prices continue to rise and the country’s electricity supply improves,” BMI says.
Despite copper prices suffering a decline, in recent weeks as a result of heightening trade war tension, BMI maintains its bullish copper price forecast of $7 000/t for this year. It further expects a persistent global undersupply to keep prices on an upward trajectory.
Tailwinds to Zambia’s mining sector include higher dam-water levels achieved in the country so far this year, which will likely reduce the possibility of power shortages in the coming months.
As part of Zambia’s seventh National Development Plan for 2017 to 2021 and Vision 2030, government will aim to promote local and foreign participation higher up the value chain through the manufacturing of finished copper goods for use in the electrical, automotive, plumbing and aquaculture industries, besides others, BMI also notes.
As a result, BMI expects Zambia’s downstream copper industry’s share of gross domestic product to gradually increase over the coming years, while the contribution of raw mining to the total economy declines.