Zambia’s copper production and prices plummet, putting country’s economic growth goals in jeopardy

Zambia’s economic growth goals for this year are in jeopardy as the country’s copper production and prices, which account for more than 70% of export revenue, plummet.

Production dropped 7.4% to 364,089 tons in the first half of 2022, according to figures released on Tuesday by the Zambia Chamber of Mines. The metal’s price on the London Metal Exchange is down 20% this year to $7,718 a ton, well below the Ministry of Finance and National Planning’s prediction of $9,595 for the year. This metal is used in everything from cars to iPhones.

Due to declining farm output, the government’s anticipated 3.1 percent growth objective may not be met.

“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.