Zambian copper production continues to rise
Zambia is by far Africa’s largest copper producer and has benefited greatly from rising output and historically high global copper prices over the past five years. According to the Zambia Development Agency (ZDA), copper production increased from 570,000 tonnes in 2008 to over 800,000 tonnes in 2012. Most recently, copper production rose by a further 20% in 2013 as new mining projects financed by international mining companies came on line. The ZDA estimates that the country’s mining sector, which is dominated by copper production, has attracted investment in excess of US$8bn since 2000 and this accumulated total could reach US$15bn by 2017 should global copper prices remain elevated and facilitate the completion of projects currently in planning, exploration and implementation phases. Indeed, the Zambian government and copper producers appear confident that production levels will rise from current levels of just under 1m tonnes to around 1.5m tonnes by 2016/17. However, these future mining developments and indeed the fortunes of the wider Zambian economy will depend on the future path of global copper prices, which looks increasingly uncertain. Copper prices have trended down since reaching an all-time high in early 2011 and fell by more than 10% during the first quarter of 2014 (mainly in March), owing to market concerns about the Chinese economy, and linked to this the ability of Chinese firms to continue to use copper as collateral in trade financing which has supported higher global prices in recent years. The recent fall in copper prices contributed to an 8% depreciation of the kwacha against the US dollar in the first quarter of 2014, prompting the Zambian central bank to raise interest rates to support the currency and the Energy Regulation Board to raise fuel prices. A sustained fall in global copper prices poses a significant risk to economic stability in Zambia given that copper accounts for around 80% of the country’s export revenue and the substantial amounts of foreign funds earmarked for investment in the sector.