President calls for SADC copper cartel

The Post in an article today on a Zambia-Namibia bilateral trade deal makes a very brief mention of a proposal made by Zambian President Levy Mwanawasa for the establishment of a Southern African Development Community (SADC) copper producers' cartel, designed to raise and stabilise the international copper price. "This will help the copper producing countries to strengthen their pricing systems." Mwanawasa said. "We cannot have a situation where non-copper producing countries are setting the prices for us."

It is certainly true that under the current system, based on the London Metals Exchange, Zambia and all other copper producers are severely disadvantaged. The swinging price of copper has been a primary factor in Zambia's underdevelopment. Solving the problem, however, especially without the co-operation of countries that buy copper and constantly seek to drive the price down, presents a significant difficulty.

Primary product cartels have been attempted in the past, including CIPEC, a copper cartel based in Lusaka. This Wikipedia article provides useful background. Perhaps the most successful of all the producer cartels has been OPEC, the oil-producers' cartel. A significant element of OPEC's success, (and by comparison, CIPEC's failure) has been put down to its ability to hold together a sense of political solidarity between diverse producer countries, including Venezuela, Nigeria and Saudi Arabia, which control a large share of the global sources of oil. How a SADC cartel would function then is not clear, since DRC and Zambia together contribute only a relatively small share of the world's copper output. If not included in any new cartel, other copper producers in, for example, Chile and Australia which might well take advantage of any SADC cartel to undercut prices set in the cartel and increase their market share.

More information and comments on where this proposal came from, whether it has any substance, and what its impacts might be, especially from readers more economically-minded than minewatcher are very welcome.