Price, volume, imports and prepayments each pulled on the external account, and the net was a US$1.4bn cushion.

By Kanisa Magazine · June 2021

The Banque Centrale du Congo’s own foreign-exchange position stood at US$505.7 million on 31 March 2021. By 14 June it was US$1.392 billion, almost three times as large in fourteen weeks. The cause was not one thing. Copper and cobalt prices were far above their December levels, mining volumes were rising, a new producer was cleared to export, and the central bank bought more dollars on the interbank market than it sold.

The weekly statistical digest of 23 June lets the effects be pulled apart, which is the only way to judge how durable the improvement is.

The price effect: metals up by a quarter or more

Copper rose 27 per cent from December and cobalt 29 per cent, but both had peaked.

London copper closed 2020 at US$7,803.50 a tonne and stood at US$9,900 on 15 June, a rise of 26.9 per cent. Cathode cobalt in London went from US$34,768 a tonne to US$44,923 over the same period, up 29.2 per cent, after touching US$55,629 on 31 March. By 18 June copper had slipped to US$9,427.50. A price that is high but past its peak adds to receipts yet also warns that part of the improvement is not repeatable.

The volume effect: more tonnes behind each dollar

Copper output was 14.8 per cent higher for January to April than a year earlier.

The BCC’s production table shows 553,942 tonnes of copper in the first four months of 2021 against 482,400 tonnes a year earlier, with Gécamines contributing 10,378 tonnes against 7,212. Cobalt rose 26.3 per cent, from 22,990 to 29,029 tonnes, and zinc 19.5 per cent. Full-year 2020 output was 1,601,208 tonnes of copper and 86,591 tonnes of cobalt, so the first four months of 2021 ran ahead of that pace. Volume matters more than price for the external account because it persists after prices fall.

The financing effect: prepayments that arrive before the metal

A US$300m advance-payment package shows how offtakers fund new supply.

On 9 June Ivanhoe Mines said its Kamoa Copper venture was fully authorised to export copper concentrate and blister copper, and that offtake agreements had been signed with CITIC Metal and Gold Mountains, a Zijin subsidiary, for half of Phase 1 production each. Both committed advance-payment facilities of up to US$150 million, a combined US$300 million bearing 8 per cent interest through 31 May 2023. Phase 1 is projected to yield about 200,000 tonnes of copper a year, and guidance for the rest of 2021 is 80,000 to 95,000 tonnes of contained copper.

A prepayment is a financing flow, not an export. It lands in the mine’s accounts before any metal ships, and how much of it passes through Congolese banks to the central bank is a matter for the interbank market rather than the producer.

The import effect: Brent at US$74 against a frozen pump price

Oil cost 44 per cent more than at year-end while the pump price stood still.

Brent crude rose from US$51.52 a barrel at the end of December to US$74.40 on 15 June, an increase of 44.4 per cent. The Ministry of Economy’s price structure table in the digest shows petrol at CDF 1,995 a litre in the west, and no change since 12 August 2020. That means the gap is absorbed somewhere between the importer, the distributors and the state. When the pump price is finally adjusted, the external account will see it as a demand and a price effect at the same time.

What the BCC says drove the build-up, and what to watch

The central bank credits interbank purchases and lower Treasury drawings.

In its communiqué after the Monetary Policy Committee meeting of 17 June, the central bank attributed the rise to two things: a strategy to maximise interbank purchases of currency, and a lower draw on dollars by the Treasury. Reserves at the end of May were worth about five weeks of imports on the BCC’s own resources, and the wider measure, which includes banks’ dollar deposits, stood at US$6.46 billion on 31 March. The gap between the two shows how thin the central bank’s own cushion remains.

For an exporter or an importer, the lesson is that reserves rose because several flows moved the right way at once. Watch three signals: the copper price against US$9,000, the Treasury’s dollar drawings, and the pace of interbank purchases. If two of the three turn, the cushion shrinks quickly, and anyone with dollar payables due in the third quarter should settle them early.