RESTRICTIONS on logistics and the supply of goods impeded the global trade for commodities, which resulted in the prices of base metals falling in the first quarter of 2020 has negatively affected the mining industry in Namibia.
Lauren Davidson, an economist at the chamber of mines stated that the demand for diamonds plummeted as a result of the pandemic as reduced salaries and wages meant that consumers changed their spending patterns away from luxury goods to essential items.
Initial growth projections for the mining industry in 2020 stood at 11.1%. However, the preliminary National Accounts, released by the Namibia Statistics Agency, show that the industry recorded a negative growth rate of 14.5%. This was a further contraction from the negative growth rate of 9.5% posted in 2019.
According to the Preliminary National Accounts, mining sector growth was negatively impacted by reduced value added from diamond mining, uranium and metal ore output. Base metals output recorded a strong contraction due to the marked drop in production of Special High-Grade Zinc, owing to the closure of Skorpion Zinc mine.
Davidson further explained that site holder sales were concluded with excess supply, creating an overflow in the diamond value chain. Rough diamond sales were also negatively impacted by frequent closures of major diamond cutting and polishing factories in India and the major trading centre in Belgium. She stated that this resulted in bottlenecks along the entire value chain, causing diamond mining operations to curtail production, including Debmarine Namibia.
As a safe-haven asset in times of uncertainty, the price of gold soared to US$2,067 per troy ounce in August 2020, reaching its highest level in recent history. During a time when emerging market currencies, stock markets and most major markets were in negative territory, the bull gold market was a favourable and stable investment option. This was also a result of increased liquidity in global markets created by supportive financial conditions and accommodative monetary policies.
Uranium was the other top performing mineral commodity in the first half of 2020, which increased to US$34/pound in June due to supply disruptions induced by COVID-19 at the Cigar Lake mine in Canada, and a three-month production cut from Kazakhstan.