Zambia copper concentrate duty to disrupt global copper supplies-sources

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Copper Concentrates
Copper Concentrates

A plan by Zambia to put a duty on copper concentrates imports could put a kink in the global supply chain for the metal, industry sources said, by forcing neighbouring Democratic Republic of Congo (DRC) to send surplus mine output elsewhere.

The 7.5 percent duty announced earlier this month and due to come into force at the start of 2017, is likely to disrupt supply of refined metal in the early part of the year, just as the global market moves away from surplus, helping to support prices.

Zambia will produce about 425,000 tonnes of copper metal this year, according to consultancy GFMS, accounting for about 2 percent of global output.

The country’s smelters, including those run by privately held Eurasian Resources Group (ERG) and India’s Vedanta Resources, currently source some 500,000 tonnes of concentrate from the DRC, according to consultants Wood Mackenzie.

This is made up of 400,000 tonnes from ERG’s Frontier mine and around 100,000 tonnes from La Sino-Congolaise Des Mines S.A. (Sicomines), a joint venture between DRC’s Gecamines, China Railway Construction Corp. and Sinohydro Corp.

“It will not be viable for smelters to buy concentrates from the DRC,” said an industry source working in Zambia. “This change will upset the supply chain for the first six months of 2017.”

Miners in the DRC would be forced to look for other ways to process their concentrate, such as sending it some 3,000 km (1,860 miles) overland to Durban in South Africa for shipping to China, a two-month trip, three industry sources said.
This would take the supplies out of circulation for several months and delay production of up to 150,000 tonnes of copper metal.

Smelters in Zambia, where capacity far outstrips current mine supply, are already struggling with low feed stocks after miners including Glencore closed copper shafts as prices fell to six-year lows.

The duty could mean they have even less concentrate to process, at least in the short term, raising costs per unit.
“People are well aware that Zambian smelters are under considerable stress to which this will add significantly,” said a source familiar with the matter.

The sources said the most affected smelters would be ERG’s Chambishi Smelter and Vedanta’s Konkola Copper Mine which source a significant part of their concentrate needs from DRC.

Officials at ERG did not reply to an emailed request for comment. Konkola declined to comment.

The new duty was likely aimed at boosting Zambian refined metal production from local concentrate supplies, but the move could backfire and instead benefit smelters in other countries such as China and India, Wood Mackenzie said.

Companies with local mines including First Quantum Minerals and Barrick Gold could increase output, traders said.

Officials from both companies did not respond to requests for comment.

The Zambian government was also coming under sustained lobbying from smelters to reverse its proposal, industry sources said.

“Some are already threatening to close down,” said a Swiss trader active in the region. “I believe that the duty is not a definitive decision”.

Reuters

8 COMMENTS

  1. +3
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    its always hard to change because such invstments are long term and capital intensive.but change must be embraced when required.lets support the government stance on this.if they are to close let them close other than being controlled by them, what we have to understand is that they are a lot of investors out there who can pump in more money if those mine were to be sold.
    Further company risk mangers take estimate such political risk in monetary terms year in and year outdone get worried funds to cover such changes are always there for these companies. Too much lobbying of private companies will leave us behind fi we always oppose what is right. Not opposition should come in and starting saying us we shall reverse such blah blah and we listen to such. All rational Zambians should support…

  2. +4
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    The disruption and delay of the Congolaise copper to reach smelters will help increase copper prices – a very beneficial development to both Congo and Zambia. Developed countries play these games all the time.

  3. +2
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    The author of this article is dull. He choose to feed us with his opinion with the one sided story. Why not telling the readers the advantages also. Propaganda stories

  4. +2
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    Best move… why should we always be dictated to? Good move the GRZ…….. Way to go!!!

  5. vote

    Dear sir
    our buyer wanted to the copper concentrate or copper ore and pls refer to below commente
    pls send to me the offer if your company can be supply the copper ore and concentrate
    working conditions are such as below

    1.korean buyer wanted to copper concentrate or copper ore,
    pls refer to below commented to working condition

    2.working condition
    -1) demanded q’ty:trial400-500 kg/trial shippment and max3,000?5,000mt monthly long term biz
    -2) copper purity : min 25%above
    -3) contract price : LMA-@% Net)/-@%(gross) if your company accepted
    -4) Suggested price structure : Cu content× LME-@% × base price
    -5) payment condition : non-transferable MT700DLC+ T/Tpay at discharge port(some adjust)
    -6) delivery condition : CIF – china port
    -buyer do…

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