Congo and Zambia strategize to capitalize on rising demand for African copper.
The Democratic Republic of Congo (DRC) and Zambia, accounting for over 13% of global copper supply and the leading African copper producers, are implementing strategic initiatives to enhance their participation in the lucrative copper trading market. Historically dominated by international trading houses such as Glencore, the copper trade is witnessing a shift as these nations seek to capitalize on the surging demand driven by advancements in artificial intelligence and the transition to green energy.
Congo’s Strategic Moves
Gécamines, Congo’s state-owned mining enterprise, is nearing an agreement with Glencore to secure approximately 51,000 metric tons of copper from the Kamoto Copper Company (KCC), aligning with its 25% stake in the mine. This initiative complements Gécamines’ existing trade of nearly 100,000 tons of copper from its 20% share in Tenke Fungurume Mining, following a deal with China’s CMOC Group in July 2023. The Congolese government is also pursuing greater control over metal sales in projects where it holds interests, including a 20% stake in Ivanhoe’s Kamoa-Kakula mine, which aims to produce up to 580,000 tons of copper this year.
Zambia’s Collaborative Ventures
In December, Zambia established a joint trading venture with Swiss-based commodities trader Mercuria. This partnership, jointly owned by Mercuria and Zambia’s Industrial Development Corporation (IDC), is designed to enable Zambia to participate directly in minerals trading. The venture plans to commence by purchasing copper on commercial terms before negotiating for physical metal corresponding to state shareholdings, moving beyond reliance on dividend payouts. Mercuria has allocated an initial budget of approximately $500 million to procure copper from local producers, with provisions for additional credit lines as more metal becomes available.
Challenges and Considerations
While these initiatives represent significant strides toward greater control over copper trading, analysts caution that substantial profits may not be easily attainable. Concerns include potential disputes over the division of mineral production and the complexity of metal trading. Additionally, there is apprehension that increased government involvement in trading could deter private investors, potentially impacting future investments in the sector.
To address concerns about fair compensation for resource-holding governments, dividends have often been a point of contention, with governments questioning whether their payouts reflect the true value of their resources.
Indigo Ellis, Managing Director of Strategy and Risk Advisory at J.S. Held LLC, suggested that linking dividends to the volume of metal mined could provide a more equitable solution. She also noted that direct government participation in metal trading could offer them greater control over pricing, allowing them to exert the influence they seek in the market. “Government-implemented trading builds up scope for locally controlled value addition and thereby increases the government’s influence over the market for copper or cobalt – which is the ultimate aim,” she said.
Hugo Brennan, Head of EMEA Research at risk intelligence firm Verisk Maplecroft, cautioned that transitioning to metals trading is unlikely to be a definitive solution, just as dividends alone have not resolved the issue. “One can foresee disputes around the division of mineral production and who trades with whom as readily as those that have previously emerged around dividend payments,” he said.
“Trying to capture greater market share from your own sales, how much do you really benefit from that and how much are you going to upset the investors,” Ben Davis, analyst at RBC Capital Markets, said.
Looking Ahead
The strategies employed by Congo and Zambia to secure a larger share of African copper trading profits are poised to be central topics at the upcoming Mining Indaba conference in Cape Town. As global demand for copper continues to rise, driven by its essential role in artificial intelligence, electric vehicles, and green energy solutions, these nations’ efforts to maximize their returns from this critical resource will be closely monitored by investors and industry stakeholders alike.
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