Investors
and mining firms gather at Africa’s biggest industry conference amid a new-found
optimism that the uptick in commodity prices could shore up investment after
years of downturn.
The annual
four-day Mining Indaba in Cape Town takes place as demand in China, one of the
world’s biggest consumers, begins to stabilise. Commodities like iron, copper
and tin are soaring to new heights, raising hope among analysts that this
year’s conference may spur funding for new mining ventures.
“A lot of these prices are up 100 percent from what they were a year before, some only fifty percent, but some three or four hundred percent, so this should be the biggest Indaba we’ve seen in a couple (of) years,” said Peter Major, mining analyst at Cadiz Corporate Solutions.
The
devastating price slump saw several commodity-dependent economies across Africa
stagnate, with companies cutting jobs and some shutting down operations. Africa’s
biggest copper producers Zambia and the Democratic Republic of Congo (DRC) were
among the worst hit, with thousand of jobs lost over the last three years. The
jobs bloodbath also hit South Africa, the continent’s most diversified economy
which is battling poor growth.
The World
Bank’s latest commodities forecast, however, confirms the worst is finally
over, with prices on a solid climb thanks to strong Chinese demand and a
tightening supply. Copper
prices jumped 10 percent in the last quarter of 2016, “the first double-digit
quarterly gain in nearly five years”, the report said.
The bank is
now projecting metals prices to rise by 11 percent in 2017, a significant
improvement from an earlier forecast of just 4 percent.
The report
said: “Policy efforts by China to boost
commodity-intensive infrastructure and construction sectors were a key driver
of demand last year. Prices also received a boost following the US election on
expectations of higher infrastructure investment and increased optimism for the
global economy.”
By the end
of 2016, iron ore was selling at $80 a tonne, nearly double its price a year
earlier, and metals like zinc were both up for the fourth straight quarter. Although
the mood was shifting, Major warned against being overly excited about
improvement, saying it looked like an “over-recovery” and adding “I don’t trust
it”.
Rene Hochreiter, an analyst at Noah Capital Markets, said
the prices would return to the mean “sooner or later”. “There
might be a bit of euphoria at the moment with it shooting over the mean and it
will come back down, but that doesn’t mean it’s going to go negative,”
he told AFP. “I just hope this time it’s not a false
start,” he added. “I’ve seen too many of those
and I don’t want to get too excited, but it feels a lot better than it has for
a number of years.”
Recovery optimism has also been reflected in conference numbers, with delegate registrations up year-on-year for the first time “in quite a few years”, according to organisers. Slow mining production had been cited as one of the major contributors to South Africa’s poor growth, currently at an annualised 0.2 percent.
The country
exports a slew of resources including platinum, gold and diamonds, but
companies must navigate a volatile strike-prone labour force and legislative
red tape. (Guardian)
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