Output is up two fifths and reserves are steady, but cobalt has stopped helping and the metals’ price fall has not ended.

By Kanisa Magazine · September 2022

Congo mined 41 per cent more copper in the first eight months of 2022 than in the same period of 2021, and the price of that copper fell about 25 per cent between 31 March and 23 September. The first number is a volume story, the second a price story, and the country’s external account lives on the difference between them.

The Banque Centrale du Congo’s digest of 28 September gives both halves. It also shows one metal doing far worse than the other, and an oil market that is turning in the country’s favour as an importer.

Tonnes against dollars

Copper output is 41 per cent up on the year while its price has lost a quarter.

Provisional output for January to August, in the BCC’s weekly digest, was 1,576,924 tonnes of copper against 1,116,232 a year earlier. The copper production index reached 285.4 in August against 161.8 twelve months before. London copper stood at US$7,814 a tonne on 23 September, against US$10,390 at the end of March and US$9,710 at the end of 2021.

Volume can offset price only for so long. Each tonne now earns about US$2,500 less than it did at the peak of the spring, so the economy needs roughly a third more tonnes to hold its copper revenue, and this year it has produced about two fifths more. That arithmetic is why reserves have not fallen in step with the price.

Cobalt is the weak link

Cobalt’s volume is up by a third, but its price is down by more than a third from the peak.

The digest lists cathode cobalt at US$56,026 a tonne on 23 September, against US$84,437 on 31 March and US$87,881 at the end of May. That is a fall of 34 per cent from the March reading and 36 per cent from the late-spring top. Output for January to August was 80,752 tonnes, up 35 per cent on 59,876 in the same months of 2021.

A producer that sells 35 per cent more cobalt at a third lower price is, on these rounded figures and ignoring the different base periods, taking in about a tenth less. Cobalt supplied 16 per cent of goods exports in 2021 on the IMF’s second-review staff report, and copper 72 per cent, so the larger sum is the copper line, but cobalt is the part that has stopped helping.

Oil and gold

Brent has fallen by a quarter since May, which eases the import bill, but gold has halved.

Brent crude was US$86.06 on 23 September against US$117.24 at the end of May, down 27 per cent. For a net fuel importer that prices pump fuel under a formula tied to import costs, the fall is the quiet good news of the digest. The ministry of the economy explained in January that pump prices move when the crude price, the exchange rate or volumes shift by more than 5 per cent, and the crude price has now moved by far more than that in the other direction.

The domestic producers are not so fortunate. Crude output of 4,394 thousand barrels in the first eight months is 9 per cent below the 4,852 thousand of 2021, and gold production is 10,386 kilograms against 20,831, a fall of half. The government has chosen to widen its oil licensing round, adding blocks that overlap Virunga National Park, as Bloomberg reported on 19 July, though that is a long-dated bet, not an answer to this autumn’s receipts.

What the next checkpoint will test

Reserves of about US$4.2 billion are adequate cover, not a buffer for a second price fall.

International reserves were US$4,175 million on 23 September and 2.50 months of imports on the BCC’s basis, down from a month-end figure of US$4,396 million on 31 August. They have held near that level since July, which means net dollar inflows to the central bank have stalled.

Three signs will show whether the account is safe. The first is whether copper falls below US$7,500, a level that would take a further 4 per cent from the current price. The second is the cobalt price: any stabilisation above US$55,000 would hold the line. The third is whether the monthly volume index stays above 250. For a supplier or bank with exposure to Congolese importers, that is the test: reserves flat for two months mean the next price fall will be met from buffers rather than from growth.