Commodities Check: Prices Tank as the Spring Flame Switches Off

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After starting the year on a roar with metals such as rhodium, palladium, and iron ore posting record highs, global commodity prices are flaming out.

Developments in international commodity markets are influenced by a confluence of factors including a surge in COVID-19 infections which continues to pose downward risks on prospects for global economic recovery, status of the US Dollar, chip shortages, production constraints as well as heightened need to combat carbon emissions.

Palladium

Palladium suffered the fifth decline in a row on Tuesday with prices trading below US$2,000 an ounce to record their lowest price in two (2) years at US$1,881 an ounce. Palladium is mainly used in catalytic converters in gasoline-powered vehicles to help control emissions.

However, the automotive industry has taken a hit as global semiconductor chip shortages have led to a slowdown in manufacturing, which in turn weakens demand for metals used to make cars, including palladium.

The trend towards remote work that accelerated due to COVID-19 movement restrictions has given rise to heightened demand for semiconductor chips.

Platinum

Platinum, a metal vastly found on the Great Dyke belt in Zimbabwe which stretches for more than 500 km and contains an estimated 96 million ounces of platinum group metals, continues to trade below the resistance level of $1,025 an ounce.

At the current $914.35 an ounce, platinum is trading at its lowest price in a year’s time on a monthly comparison basis since September 2020.

Like palladium, platinum price is under pressure as the auto industry grapples with the ongoing computer chip shortages.

Zimbabwe has the world’s second-largest resource of platinum group of metals.

Iron Ore

Iron ore price has been on a free fall since climbing to a record high of $235.55 a tonne in May 2021 on concerns about the decline in demand from China, which makes more than half of the world’s steel. This has resulted in prices dipping to the current $117.01 a tonne from below $100 on Monday.

China’s decision to curb steel production is driven by the need to advance climate goals, and this, in turn, has given the Asian powerhouse a controlling power in commodity markets.

Zimbabwe has huge iron ore deposits associated with banded ironstone formations in greenstone belts. According to the Mines Ministry, major deposits are estimated to be over 30 billion tonnes of reserves. Deposits with high-grade ore are found in Buchwa and Ripple Creek. Significant ironstone deposits include the huge Mwanesi deposit west of Chivhu and Nyuni near Masvingo. Manyoka and Mongula and several similar deposits in the Limpopo Mobile Belt are also important deposits.

Silver

Silver which in Zimbabwe is mostly found in Makoni, Makonde and Kwekwe, posted a fifth (5) consecutive fall on a monthly basis to $22.370 an ounce on Tuesday, down from $24.006 on Monday. Silver prices are under pressure from a stronger dollar and selling base metals on weaker demand outlook on rising COVID-19 worries.

The good thing about silver is that precious metals may temporarily lose their “worth”, but they never lose value. Investors turn to silver and other precious metals again and again when they want to invest for the long term, meaning that current low rates are not as worrisome as they may seem.

Silver is one of the minerals mostly mined in Zimbabwe. Silver, according to Mines Ministry, occurs as native silver in association with other minerals such as gold, copper, and lead. With the exception of the Osage Mine in Zimbabwe, it is declared as a by-product from the mining of platinum, gold and copper. Gold mines in the Odzi greenstone belt have the highest silver and gold ratios.

Gold

Gold prices have fallen to their lowest in six (6) months as a stronger US dollar dampened the appeal of the safe-haven asset.

The price of the precious metal dipped to $1,761.40 on Tuesday, the lowest since March 21 recorded at $1,717.50 an ounce.

Gold will likely remain volatile as investor’s attention is pinned on the outcome of the Federal Reserve’s September Monetary policy meeting scheduled this Tuesday and Wednesday.

The yellow metal is one of the most mined minerals in Zimbabwe. Some of the top gold producers in Zimbabwe include Freda Rebecca, which is located close to Bindura’s Trojan Nickel mine, Blanket Mine located in Matebeleland South, Rio Zimbabwe, Metallon Corporation, Sabi gold mine, Falcon Gold and Eureka Gold Mine among others.

In 2020, gold accounted for 40% of the country’s mineral exports whilst 25% contributed to formal mining employment. US$981 million was earned from gold exports in 2020, down from US$1.64 billion in 2019.

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