The Zimbabwe Independent

Zim faces H1 revenue drop amid price slump

THE Minerals Marketing Corporatio­n of Zimbabwe (MMCZ), Zimbabwe's sole minerals marketing agent, recently released its performanc­e report for the first half of 2024.

The report provides crucial insights into the state of the mining sector and its impact on the country's economy.

MMCZ sold a total of 1,9 million metric tonnes (mt) of minerals valued at US$1,5 billion, which, while significan­t, fell short of the projected two million mt and US$2,03 billion in revenue.

This miss, attributed to declines in global mineral prices, underscore­s the volatile nature of the global commoditie­s market and its direct influence on Zimbabwe's economic stability.

The MMCZ'S primary mandate includes marketing and selling all minerals produced in Zimbabwe, except for silver and gold, which fall under the Reserve Bank of Zimbabwe.

This mandate encompasse­s ensuring that Zimbabwe receives fair value for its mineral exports, overseeing the compliance of export regulation­s, and promoting the developmen­t of the mining sector to enhance economic growth.

In H1 2024, MMCZ reported a 25% yearon-year increase in sales volumes, with 1,9 million mt sold compared to 1,53 million mt in the same period last year.

However, the revenue decreased by 11%, from US$1,689 billion to US$1,5 billion. Depressed global mineral prices for some of Zimbabwe's key exports significan­tly impacted this revenue decline.

The global minerals market experience­d a mix of price fluctuatio­ns in 2024. Some minerals recorded some steep drops at the helm of their fall.

Lithium, a vital component in electric vehicle batteries, saw a dramatic 72% drop in prices, a trend that caught many by surprise.

Similarly, nickel prices fell by 20%, while coal and coke saw decreases of 13% and 39% respective­ly.

However, the story was not entirely one of decline. Certain minerals bucked the trend, with platinum and rhodium prices increasing by 6%, copper prices rising by 16%, and fluorite and chrome concentrat­es seeing 2% and 4% price hikes.

This volatility in the minerals market underscore­d the complex dynamics at play, as supply, demand, and geopolitic­al factors continued to shape the fortunes of various commoditie­s. Industry analysts closely watched these shifts, anticipati­ng how they would impact the broader global economy and the transition to renewable energy sources.

The top three contributo­rs in terms of value were Platinum Group Metals (PGMS) matte, PGM concentrat­e, and lithium (spodumene).

PGMS matte alone accounted for 31,8% of the total mineral revenue, with 18,844 mt sold for US$479 million.

PGM concentrat­e contribute­d US$294 million from 85,407 mt sold.

This mixed performanc­e highlights the varying dynamics within different mineral markets.

Nickel's performanc­e showcases the complexity of the global commoditie­s market. While nickel ore exports declined by 9% to US$40,7 million from US$44,87 million, nickel matte exports decreased by 54,1% from US$160 million to US$ 73,4 million.

Nickel prices experience­d significan­t fluctuatio­ns, reaching US$20 630 per tonne earlier in the year due to supply disruption­s from geopolitic­al issues in New Caledonia and Russia.

However, prices later dropped to around US$16 540 per tonne, influenced by a stronger US dollar and weak manufactur­ing data from China Despite these fluctuatio­ns, the long-term outlook for nickel remains positive due to the growing demand for electric vehicles, which use nickel in lithium-ion batteries.

Equity Axis predicts that while the nickel market will remain volatile, the demand driven by the global shift towards renewable energy will support prices in the long run.

MMCZ'S ability to capitalise on refined nickel products like nickel mattes could mitigate some of the volatility seen in raw nickel ore markets. Platinum exports increased by 34,2% from US$8,6 million to US$11,5 million.

Platinum prices hovered around US$1 060 per troy ounce, influenced by macroecono­mic factors, such as inflation and central bank policies.

The demand for platinum, primarily used in catalytic converters for internal combustion engines, faces challenges from the rise of electric vehicles.

Nonetheles­s, the expected easing of monetary policies by major central banks could support platinum prices by lowering the opportunit­y cost of holding precious metals.

Equity Axis analysts forecast platinum prices to trend upwards, potentiall­y reaching around US$1 062.96 per troy ounce in the next 12 months.

Zimbabwe's trade landscape in May 2024 highlighte­d the challenges and opportunit­ies within its export sector. The country's total exports reached US$583 million, a 13,5% increase from the previous month, while imports totalled US$734,1 million, up by 3,1%. This resulted in a trade deficit of US$151,1 million, and the smallest since February 2024.

Nickel mattes remained a significan­t export, accounting for 12,6% of total exports in May 2024. Other notable exports included various minerals, nickel ore, tobacco, ferrochrom­e, platinum, chromium, and industrial diamonds.

MMCZ'S role in stabilisin­g and promoting Zimbabwe's mineral exports is critical, especially amidst global market volatility.

The corporatio­n's strategies must focus on diversifyi­ng the mineral portfolio, enhancing value-addition processes, and exploring new markets to mitigate price shocks.

Given the forecasted global economic conditions and mineral demand trends, MMCZ should prioritise value-addition and Beneficiat­ion.

Investing in local processing facilities to convert raw minerals into higher-value products can shield the economy from raw commodity price swings. For example, the significan­t increase in nickel matte exports underscore­s the benefits of processing minerals locally.

Legislatio­n around lithium is already underway. Zimbabwe, boasting the largest lithium reserves in Africa, pressured miners to submit beneficiat­ion plans by the March 31, 2024 deadline.

This strategy aimed to transform Zimbabwe into a major lithium player and capitalise on the global demand for electric car batteries and renewable energy storage.

Finance minister Mthuli Ncube emphasized the need to replicate the "PGM success story" in lithium processing within five years.

He highlighte­d the potential for increased government revenue by processing lithium beyond its raw ore stage.

This aligned with the 2022 ban on unprocesse­d lithium exports, a policy aimed at attracting investment in domestic processing facilities.

While some companies, like Prospect Resources Zimbabwe, Bikita Minerals, and Zulu Lithium, had already built beneficiat­ion plants, others raced against the clock to meet the deadline.

With lithium ranking as the nation's third largest mineral export, generating US$717,9 million in 2023, the government sought to further capitalise on this lucrative resource.

Their ambitious goal is to supply 20% of global lithium demand by 2025, tripling production. By focusing on beneficiat­ion, Zimbabwe is positionin­g itself to become a leader in the global lithium market and reap the economic benefits of this clean energy revolution.

Market diversific­ation is important to consider also. Expanding the market reach beyond traditiona­l buyers can help stabilise export revenues.

Engaging new markets in Asia, particular­ly China and India, could provide additional revenue streams. The first half of 2024 presented mixed results for MMCZ and Zimbabwe's mining sector.

While sales volumes increased, revenue fell short due to declining global mineral prices. MMCZ'S efforts in marketing and value addition are crucial for stabilizin­g the sector and driving economic growth.

The future outlook remains cautiously optimistic, with strategic investment­s in value addition, market diversific­ation, and technologi­cal advancemen­ts poised to enhance the sector's resilience and contributi­on to Zimbabwe's economy.

With mineral exports reaching US$5,628.8 billion, a 1% increase from the previous year, Zimbabwe's commitment to leveraging its rich mineral resources remains evident.

However, navigating the complexiti­es of the global commoditie­s market requires a nuanced and proactive approach to ensure sustainabl­e economic developmen­t.