Cobalt and copper filled the cushion in the first half, while the repayment bill grew faster than the metals.

By Kanisa Magazine · July 2021

Congo’s international reserves, counting commercial banks’ foreign-currency deposits, reached US$8.118 billion on 16 July 2021, enough for 7.70 months of imports. Six months earlier the figure had been US$6.334 billion, or 5.80 months. In the same stretch London cobalt on the LME rose 64 per cent and copper 20 per cent. That is the headline. The detail is that, by the same date, Congo’s external debt service had already exceeded what it paid in the whole of 2020.

The BCC’s weekly digest of 28 July carries both stories, and an exporter needs to read them together.

Price: metals high, but off their peaks

Copper ended the half at US$9,346, 8 per cent below its end-May close.

Copper closed 2020 at US$7,803.50 a tonne and stood at US$9,346 on 16 July, a gain of 19.8 per cent. It had touched US$10,159.50 at the end of May. The LME’s 99.3 per cent cobalt grade went from US$32,000 a tonne to US$52,495 over the same period. The London cathode quote carried in the digest was unchanged at US$44,922.74 for weeks, so the LME series is the more reliable guide. Brent crude, at US$72.46 a barrel, was 40.6 per cent above its end-December level and a cost on the import side.

Volume: a new supplier joins the export line

Kamoa-Kakula sent its first truckloads of concentrate abroad on 17 July.

On 19 July Ivanhoe Mines said that bagged copper concentrate had left the Kamoa-Kakula mine for the Port of Durban on 17 July, with 2021 output guided at 80,000 to 95,000 tonnes of contained copper. The company’s president said the mine was producing more concentrate than the nearby Lualaba smelter could process, which is why export approval mattered. Mining Weekly carried the same milestone. The BCC’s own production table, still showing only January to April data, had copper up 14.8 per cent on the year at 553,942 tonnes and cobalt up 26.3 per cent at 29,029 tonnes, so the reserve build rests on more tonnes as well as higher prices. Gécamines, the state miner, contributed 10,378 tonnes of copper in that period, against 7,212 a year earlier, a small slice of national output but a visible one.

Financing: the repayment line grew faster than the metals

External debt service reached CDF 348.5 billion by 16 July against CDF 225.5 billion for all of 2020.

The Treasury table in the digest shows external debt service, principal and interest, at CDF 348.5 billion by 16 July. For the whole of 2020 the figure was CDF 225.5 billion. At the indicative rate of CDF 1,988 to the dollar, that is about US$175 million in under seven months against about US$113 million at the same rate over the whole of last year. Debt service is a claim on reserves before it is a claim on the budget, because the Treasury needs dollars to meet it. If that pace continued through December, the full-year bill would be well over double 2020’s, a pressure the metals have to cover.

The BCC’s own cushion

Narrow reserves were US$1.325 billion, 2.6 times the end-March level.

On the narrow definition, which counts only the central bank’s own position, reserves were US$1,325 million on 16 July against US$505.7 million on 31 March. That is about five weeks of imports on the BCC’s own resources, a thinner cover than the headline 33 weeks. The gap between the two numbers is the share of reserves that sits with depositors and could leave if confidence turned.

What a mining supplier or importer should do

Treat the cushion as real but partly borrowed.

A mining supplier should plan on a market that is growing in volume as well as price, since new concentrate exports add to existing volumes. An importer should assume that dollar cover is adequate for the third quarter, but that it depends on cobalt prices and on debt service not compounding. The practical step is to lock dollar supply contracts for the next two quarters now, while the cushion is wide, rather than waiting for the next price reversal.