According to the Zambian central bank, Zambian copper production over H2017 totalled 362 Kt, down slightly from 367 Kt in 2016.
No details have been given by the Zambian authorities on this decline, yet it is likely that Zambia's ongoing power supply problems have been the key constraint on copper mining activities.
Despite this setback, the Zambian government expects copper production to rise from 774 Kt in 2016 to 850 Kt in 2017, amounting to 9% y-o-y growth.
This is the view of BMI Research - a unit of the Fitch Group.
While not as optimistic, BMI Research is positive on Zambian copper and maintain its forecast of 7% growth this year as Zambian President Edgar Lungu remains personally supportive of the sector and rising copper prices will incentivise domestic miners to ramp up production during H2017.
Presidential support to minimise risks
As BMI Research has outlined in previous analysis, the ongoing power shortages resulting from the country's over-dependence on hydro-power and rising power tariffs is the key risk facing the Zambian mining sector moving forward.
In August alone, two of the country's main copper producers, Glencore and First Quantum Minerals (FQM), were forced to reduce power at key operations due to tariff disputes with electricity provider Copperbelt Energy Corp.
The combined copper output of mines affected, Glencore's Mopani and FQM's Kansanshi, amounted to over 400 Kt as of 2016.
This represents more than 50% of current Zambian copper production, posing serious risks to Zambia's copper production outlook this year.
However, BMI Research expects Zambian President Edgar Lungu's strong commitment to mining sector development in the country will likely minimise any serious impact of power shortages on Zambia's copper production this year.
For example, following President Lungu's intervention on 30 August, Glencore announced they had reached a deal with Copperbelt Energy Corp. that will restore full power supply to the Glencore's Mopani operations.
Previously in May 2017, President Lungu also resolved a court case involving FQM and the state investment company ZCCM Investment Holdings, which has a 20% stake in FQM's Kansanshi mine.
ZCCM began arbitration proceedings against FQM, claiming 1.4 billion from the miner over allegations it had wrongly used ZCCM's cash, but ultimately dropped the case following President Lungu's intervention.
In addition, improving rainfall and rising dam levels in the country will ease some of the power shortages which have been experienced in recent quarters.
Zambia is highly dependent on hydroelectric power generation and water levels at the Kariba hydroelectric dam have already risen from 31% in May 2017 to 54% in May 20 17, which should help provide miners with ample power supply in H2017.
Rising prices to boost production
Another key driver of Zambian strong copper production this year will be the positive trajectory of prices in 2017 relative to last year.
Since touching lows of US$4, 500/ton in June 2016 , copper prices have risen over 57% up to $6,810/ton on 30 August due to strong Chinese demand and generally tightening fundamentals.
Bullish views on copper were recently confirmed in July when the metal broke above the $6,000 /ton leading to a new trading rang e between $6,000 - 7,000/ton that will prompt an upside revision to BMI Research's price forecast in the coming weeks.
While it is possible that prices may unwind from current levels towards the end of the year, BMI Research thinks the gradual uptrend over the last 12 months will bode well for mining activity in Zambia as copper producers will likely raise production on the back of increased profitability.
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