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annemarie.roodbol_55989 Oct 28

Riding the storm: Commodities showing resilience during a crisis

Riding the storm: Commodities showing resilience during a crisis image
Riding the storm: Commodities showing resilience during a crisis
While the COVID-19 pandemic has caused unprecedented financial disarray on a global scale, there is a silver lining for some commodities mined in the Democratic Republic of Congo (DRC).
This is the consensus of panellists on a recent DRC Mining Week (DMW) webinar. GERARD PETER reports.  

The webinar, part of the DMW Digital Event in June, featured George Heppel, senior analyst: cobalt, lithium and battery minerals, CRU UK;  Olivier Binyingo,  director at Herbert Smith Freehills South Africa;  Cyrille Mutombo, Country Manager Barrick DRC; and Simon Tuma Waku, deputy MD, Tenke Fungurume Mining in the DRC.

According to Heppel, at the onset of the COVID-19 pandemic, there was a negative sentiment about the Electric Vehicle (EV) industry, particularly in large markets such as Europe and China.
As a result, that would have had an impact on battery metals such as cobalt of which the DRC is a key mining player.
However, Heppel pointed out that the EV market is showing signs of strong resilience.  

“In April, global automotive sales were at their lowest level since 1998. However, on the upside, the EV market showed positive signs. In Q1 sales in Europe, the world’s largest EV market was at the highest it has ever been.
“COVID-19 gave us a lot to be worried about when it came to EV demand but instead we can expect sales to be largely flat year on year. As such, concurrent demand for cobalt, lithium, graphite and copper will not be as bad as originally expected.”
Tuma Waku added that demand for copper and cobalt demand will also be in demand as China resumes building its economy.
“The Chinese have a lot of interest in the DRC and put measures in place in order to continue operations during the State of Emergency in the country,” he explained.  
“This gave the market some confidence to stem the fall of commodities as China remains committed to keeping production levels at 2020 levels despite the pandemic. This resulted in a positive upswing for copper and cobalt since March, almost getting back to levels where they were at the end of 2019.”

Gold proves it mettle again

Meanwhile, Mutombo weighed in on the reason why gold is reaching record prices in the midst of the pandemic.
“This seems to be historical as investors always seem to bank on gold as a form of refuge when there is uncertainty in the market. What we are seeing now is similar to how the market reacted to the global financial crisis of 2008 when the gold price rose soon after the crisis.”
However, he added that the price will balance itself out as proven in the past.

“The crisis is going to ease and as far as gold is concerned, I believe that the demand will still be there. Naturally, there will be some return to normality in the price as we move forward.”
In order to take to take advantage of market conditions, current and future, Binyingo advised that the DRC government needs to put measures in place to make the country more investor-friendly.

“The DRC seems to operate by a ‘rule by law’ rather than ‘rule of law’. This means it imposes taxes, fines and penalties to make their point against business and that dissuades investment in the country,” he said.
Mutumbo concurred adding that policy makers need to create incentives to help build infrastructure, particularly in this remote parts of the country, to make new projects viable.

The panellists agreed that once the COVID-19 pandemic passes, there will still be high demand for gold and battery metals. This bodes well for the DRC which is rich in natural resources.
However, they urged government to address its mining regulatory policy in the country to boost investment confidence in the country.