The recent drop in international commodity prices has exposed primary commodity exporting economies such as Namibia’s vulnerability to the vagaries of the global market forces, analysts said Thursday.
Analysts said that high commodity prices, a golden goose which usually boost narrowly diversified economies’ export revenues, has become barren as prices of copper, zinc, gold, uranium, platinum reach an all time low.
Loss of export revenues could seriously hurt developing economies which usually raise the bulk of state revenue from the corporate sector.
For mine operators, slump in the prices of commodities means tighter operating margins and rising cash costs and consequently, supply side cuts from producers.
Namibian economic analyst Robin Sherbourne said that the recent slump in the price of base metals had taken the roof off the narrowly diversified domestic economic.
“The bad news is that we do not know how long the downturn is going to last and the longer the price slump continues, this has negative impact on current Namibian projects and even those lined up to come on stream,” Sherbourne said.
Copper for three month delivery on the London Metal Exchange (LME) this week fell to around US$4,000 a tonne.
The price of the metal, which is used in power and construction, has fallen more than 50 percent since a record high of US$8,940 in July.
Sherbourne said that miners do not dig just for the sake of producing tonnes and falling prices might results in companies cutting back on production in a bid to slash overheads.
The price of zinc has also fallen by 59 percent to trade around US$1,200 a tonne on the LME.
Market analysts said that zinc mines currently have a cost of production above the prevailing market price.
The spot price of uranium has also slumped to around US$45 per pound, from about . US$136 a pound last year.
“We (Namibia) are lucky that we still have an industry which is still sheltered from price fluctuations because of supply contracts and the demand for uranium is still high. Uranium is the big growth area for Namibia at the moment,” Sherbourne said.
Veston Malango, Namibia Chamber of Mines General Manager, said that commodity prices had become a major concern to the industry.
Malango said that to review costs, producers might be forced to adjust production and scale down expansion plans.