Zambia’s growth target shaky as copper output drops, prices plunge

Kansanshi is the largest copper mine by output in Zambia and is 20% owned by ZCCM-IH, with the balance owned by First Quantum Minerals. (Image courtesy of First Quantum Minerals)

Zambia’s economic-growth targets for this year are looking shaky as its copper production plunges along with prices of the metal it relies on for more than 70% of export earnings.

Output fell 7.4% to 364,089 tons in the first half of 2022, data from the Zambia Chamber of Mines showed Tuesday. Prices for the metal that’s used in everything from automobiles to iPhones are down 20% this year to $7,718 per ton on the London Metal Exchange — well below the Ministry of Finance and National Planning’s July forecast of $9,595 for the year.

The government’s budgeted 3.1% growth target may be under threat, as farm output is also shrinking.

“With half the year gone, the government’s target of 1.3 million tons for 2022 appears unattainable,” Absa Group Ltd. analyst Ridle Markus said in an emailed note Wednesday. That, “along with weaker output expected in the agriculture sector, is likely to further weigh on economic growth,” he said.

The slump in first-half copper came despite the government giving mining companies tax incentives this year and broadly improving the operating environment. Output fell at both mines that First Quantum Minerals Ltd. operates in Zambia, which together account for more than half of national production, as prolonged rains and pandemic restrictions curbed output in the second quarter.

Unless mining operators reverse the production drop in the second half, Zambia annual output may slump for a second straight year, even after prices rose to a record $10,674 a ton in March. The government is targeting to grow production to 2 million tons by 2026 and to 3 million tons by 2031.

Zambia’s creditors — with whom the government is in talks to restructure external liabilities that have grown to $17.3 billion — will be watching copper production closely. Exports of the metal provide most of the dollars the government will need to ultimately repay them once the debts have been reworked.

The Ministry of Finance and National Planning in July forecast output would grow to 833,480 tons this year from 802,967 tons in 2021. In the medium-term budget plan, it targets production of 986,902 tons by 2025.

Zambia’s copper export volumes fell 8.4% in June from a month earlier, according to data from the statistics agency.

(By Matthew Hill and Taonga Clifford Mitimingi)

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