Commodity prices


The sharp drop in commodity prices is a reality which neither the government nor unions nor indeed mine workers can ignore or wish away.

It would be folly to proceed as if the situation was normal and it would be even greater folly to take disastrous measures beyond what will be called for to ameliorate what is likely to be a passing phase.

Whatever steps are taken will have implications beyond the mining industry into the economy in general and families in particular.  Any attempt to underestimate or indeed underplay the gravity of the situation is an exercise in futility which will produce deleterious results.

The reality is that prices for commodities have been dropping with crude oil suffering the worst possible disaster from a high of US$150 to below US$50.00.  Even gold has tumbled below US$1100 an ounce which is in the 5-year lows. 

The reality is that demand for commodities has slowed down as China struggles with a serious case of slow down and under performance.

That this is a global situation is not in doubt.  What is worrying however is the reaction and response by such companies as Glencore which will put about 4300 people out of work seemingly as a result of low prices.

This is not acceptable because the prices of copper may have indeed hit an all time low they cannot compare to the prices that prevailed in the 1970’s.  Indeed it cannot be said that these prices can only affect one or two companies, namely Mopani and Baluba. To add insult to injury Mopani which is about to lay off about 20,000 workers in Congo, is blaming unrequited tax refunds, electricity deficit and finally the price as grounds for this decision.

The circumstance and resultant action do not match. President Lungu has made it very clear that no mine should close on account of electricity deficit.  It therefore stands to reason that Mopani is getting sufficient energy to continue operations.  The same can be said about Baluba which is receiving a sufficient quota of electricity.

Now we hear that Mopani may actually be suffering from unrequited taxes amounting to US$300 million.  It is difficult to substantiate this figure but if in fact that is the case Mopani should not close because the $300 is a recurrent cost that must be budgeted and therefore provided for.  It should not be the basis on which 4300 will lose their jobs because the mine may not be making super profits but it is certainly able to meet its immediate costs and it is unfair to hold worker hostage.

That is why we agree with the government that any closure should be thoroughly examined before implementation.

The workers should not be the weak point that should be attacked first.  They are a vital source deserving first priority in the allocation of resources.

The current $5000 plus per ton of copper does not merit the drastic and severe measures that Mopani is taking.  Other cost cutting measures must be considered while the discussion with government on outstanding VAT refunds continues on a different plane. It is virtual blackmail to combine unconnected elements into a firm executive decision that will not only hurt the nation but also the very miners that sustain profitability in the best of copper prices.

It is our strong and very firm belief that jobs must come first before the bottom line.


Categorized | Editorial

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