As the trade ward ensues between the United States and China, Zambia’s Central bank Governor Denny Kalyalya will be praying for copper and China. In a recent article attributed to the FT, in a recently published Global Outlook report, Barclays is reported to reaffirm its position of 6.7 per cent growth forecast for China in 2018 and 6.5% in 2019. With J. P. Morgan predicting a similar range, Chinese growth is expected to tapper by 0.1 per cent all due to the trade war as anticipation grows on the affirmation of the new tariffs.
Denny will be closely watching the battle between the Renminbi and Dollar as China reforms its fiscal and monetary policy. J.P. Morgan fears that if China’s growth is falters due to this trade war, copper’s recent upward rebound may be under threat and could quickly unravel.
Copper exports are one of Denny’s source for the much sort after green back. With the Minister of Finance announcing recently in her maiden budget presentation in September 2018 that mining taxes were to be revised as she and her team attempt to consolidate the tax blanket around the mines, mining companies will be attempting to make the most of the current wave on the copper surge for as long as it lasts. However, if indications are that copper prices may cool, this will present a complex dilemma for all counterparties in the copper economy.
It’s a known fact that Denny knows the impact of a volatile dollar against kwacha. In his August Monetary Policy address, he cited the kwacha-dollar debacle as one of the three factors that was giving him a headache in maintaining inflations within the 6% to 8% target rate.
According to Thomas Reuters, as at August 2018, Copper was trading just below US$6000 per ton in London trading. Copper is not alone in this present plummet. Aluminium, nickel and zinc too are suffering the same fate. With copper considered a bellwether for the global economy, a weakening price is a cause of concern for Denny.
On the flip side, with AEL Zambia Plc recently announcing their half year results for 2018 and indicating that there is a slowdown in the Zambian mining sector. There is clear and present evidence that the fall in copper is now rearing its ugly head and presenting an inglorious dilemma for Denny come his last MPC address later this year.