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Zambia’s Power Crisis Threatens Global Copper Supply

ZESCO Issues Force Majeure to Mining Giants Amid Drought

by Adenike Adeodun

Zambia’s state power utility, ZESCO Ltd, has issued force majeure notices to several mining companies, signaling that it will be unable to meet its electricity supply commitments fully. This development comes at a time when the copper market is already experiencing unprecedented levels of tightness.

The Chamber of Mines in Zambia, which is the second-largest copper producer in Africa, revealed that ZESCO had informed some of its members about the shortfall in power supply. The specifics of which mining projects are affected were not disclosed in the statement.

This situation adds another layer of complexity to the global market for copper, particularly the semi-processed form known as concentrates. According to a report by Bloomberg last week, which cited veteran traders, the market for copper concentrates is tighter than it has ever been. This tightening has been progressively building over several months, exacerbated by unexpected events such as the shutdown of First Quantum Minerals Ltd.’s Cobre Panama mine and reduced production forecasts from major players like Anglo American Plc. Additionally, Codelco, the world’s leading copper producer, has reported its lowest production levels in 25 years.

Zambia produced nearly 700,000 tons of copper last year and has ambitious plans to increase this output more than fourfold by 2031. The country hosts significant mining operations, including those owned by First Quantum, Barrick Gold Corp., and Abu Dhabi’s International Resources Holding. However, Zambia’s reliance on hydropower, which accounts for 85% of its electricity generation, poses a significant challenge, especially given the ongoing drought conditions. The country is currently facing rolling blackouts, and last month, ZESCO’s chief announced intentions to request mining companies to reduce their electricity usage by up to 20%.

The Chamber of Mines has urged ZESCO and the Zambian government to prioritize the protection of crucial mining operations, particularly underground mines and smelters, which could suffer irreparable damage due to power outages. The statement from the chamber underscores the delicate balance between managing power supply and safeguarding the mining industry, which is vital not only to Zambia’s economy but also to the global copper market. The miners are reportedly aware that they can no longer be completely shielded from power supply fluctuations; however, significant losses in key mining assets could have disastrous consequences for both the industry and the national economy.

As the situation unfolds, the response from ZESCO and the broader Zambian government will be critical in determining the impact on both local and global copper markets. The ongoing energy challenges highlight the need for sustainable solutions to support the country’s ambitious growth plans for its copper sector amid environmental and economic pressures.

Source: Mining Weekly

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