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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Copper Prices To Rocket In 2017

Copper

Warnings of a potential surge coming in global copper prices this week. Emerging from a place few observers in the space are focused on.

The southern Africa producing nation of Zambia.

Industry sources in Zambia told Reuters this past week that some big changes are quietly afoot in the copper market here. Triggered by a change in government policy for local smelters.

That’s a new tax reportedly being introduced by the Zambian government on imports of copper concentrates. With officials apparently planning to tax incoming shipments of concentrate at up to 7.5 percent.

Here’s why that matters for global copper prices.

Industry sources said the proposed tax would likely make concentrate imports uneconomic for most Zambian smelters. With these buyers unable to make a profit if the additional levy is added on top of already-thin margins.

That would likely bring a halt to concentrate imports into Zambia. Which currently run at least 500,000 tonnes yearly, coming from mines in the neighboring Democratic Republic of Congo.

Industry sources said the sudden surplus of Congolese concentrate would “upset the supply chain for the first six months of 2017.” With 500,000 tonnes of concentrate supply here now seeking buyers elsewhere in the world – possibly in China or India, shipped through South African ports.

Related: Russian Energy Minister Novak: Russian Oil Companies Will Cut

Given the long distance involved, it could take up to two months for these concentrates to start reaching smelters. With sources estimating that up to 150,000 tonnes of copper metal production could be delayed by the transit.

That could result in a short-term supply squeeze. Potentially spiking copper prices higher, at least for a few months in early 2017.

Zambia’s smelters have reportedly been pressuring the government to drop the new tax. Watch for a final decision on this critical legislation, and for resulting effects in copper supply and prices if the measure does go ahead.

Here’s to butterfly wings flapping,

Dave Forest

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