Miners, suppliers cheer bullish price forecast
THE mining sector is confident that bullish commodity price forecasts on the international market will materially improve the prospects of the industry going forward.
Suppliers to the sector also believe the industry could be going through the boom cycle after last year’s prices declined.
Senior economist and lead author of the Commodity Markets Outlook at the World Bank, Mr John Baffes said in a statement on January 24, 2017; commodity prices will rise after bottoming out last year.
The Bank upgraded its metals price forecast to an increase of 11 percent from four percent initially projected in the October outlook.
Tightening global supply and strong demand from China and other developed economies are expected to drive prices.
“Prices for most commodities appear to have bottomed out last year and are on track to climb in 2017. However, changes in policies could alter this path,” said Mr Baffes.
Government expects mining to grow 6,9 percent this year, underpinned by output in gold, platinum and nickel.
But market watchers say the performance of the mining sector will largely depend on the recovery of international commodity prices and the completion of planned investments.
In a state of the mining industry report released recently, the Chamber of Mines of Zimbabwe (CoMZ) said investor confidence in the extractive sector has grown by 23,9 points, driven by positive growth prospects for 2017.
“Notable improvements in confidence relate to investment plans, mining growth prospects, mining title, consistency and predictability, political risk and employment,” read part of the report.
Although 66 percent of mining executives expect the economy to contract this year, the Confederation of Zimbabwe Industries (CZI) — the country’s biggest business lobby group — is however optimistic that economic growth will top four percent.
The World Bank estimates a 3,8 percent growth.
Mining industry suppliers opine that commodity price increase will benefit the whole value chain - the producers, suppliers and the economy.
Mr Shephard Kembo, the managing director of Fluid and Power Technologies (FPT) — which supplies conveyor belts, ventilation systems, ducting fans, cured and uncured rubber among other products — says subdued mineral prices were not good for the sector and the economy.
“This is a welcome development as this is expected to cascade down to the mines initially, suppliers and the general economy as well. As commodity prices increase, mine productivity increases as well; this heralds the increase of production levels at the mines.
“Most mines have had very subdued production, which has not been good for both the sector and the economy, and this has been going on for a very long time.
“The anticipated increase in prices would mean that the mines’ activities will significantly increase as the return on production would be encouraging. This would be good for the mining companies, the other concerned and related stakeholders as well, with suppliers being one of the important identifiable stakeholders who would reap the immediate benefits of such a favourable market development,” he said.
The mining sector is key to local economic growth.
Government is considering adding value to mineral exports in order to get the maximum possible value from the sector.
It is hoped that the resurgence of the mining sector will have a direct impact on economic growth.
“We do hope that this year marks the recovery of the mining industry. We have continued to support the industry even during difficult times and we will continue to play a support role to the sector,” added Mr Kembo.
Besides the gold mining sector, which performed relatively well, the industry has been worryingly subdued. This negatively affected economic growth in 2016.