Kazakhstan unrest offers price support, but president’s call for higher mining taxes could have stronger price impact

Human and political rights activists have been suffering escalating repression in the former Soviet state of Kazakhstan. The result has been widespread rioting and the reported death of over a hundred protestors this month.

map of Kazakhstan
Zerophoto/Adobe Stock

The protests kicked off with rises in liquefied petroleum gas (LPG) prices but stem from extreme inequality and corruption in the Central Asian nation. There seems to be a state of calm after Russian forces entered the capital under the auspices of the Collective Security Treaty Organization bloc, consisting of some 2,000 troops and 250 units of military equipment.
Reports last week suggest those troops could be heading home later in the month. However, whether that will result in an end to the unrest or the return of people to the streets is unclear.
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How has Kazakhstan unrest impacted metals prices?

For metals markets, the riots raised anxiety over supply but offered no more than modest support to prices.
The events there have not had a significant impact on mining operations. However, the fact Kazakhstan is such a large ore and refined metal producer, metals prices could react further if the riots spread to become a national strike.

For the time being relative peace has seen prices ease back.

LME copper price chart
Source: LME

An ING Bank post explains Kazakhstan is a sizeable supplier of major metals, particularly to China.
During the first 11 months of 2021, China imported 765 kt of copper concentrate (3.6% of total imports) from Kazakhstan. China also imported 243kt of refined copper (7.6% of total) from the country.
Imports of zinc concentrate were rather smaller (46 kt, representing only 1.4% of total imports). However, its imports of refined zinc totaled over 195 kt. That accounted for almost half of its total imports during the first 11 months.
But the threat to metal supplies doesn’t only come from protestors.

President calls for higher taxes on miners

Recently, Kazakh President Kassym-Jomart Tokayev ordered his government to extract greater tax revenue from the mining sector, which he said was profiting from higher metals prices, Reuters reported.
Kazakhstan is the world’s largest producer of uranium. In addition, the country holds large deposits of copper, iron ore and zinc.
Quite how the plan might affect foreign mining and commodity companies — such as Glencore (which owns copper, lead and zinc producer Kazzinc), Rio Tinto (which is involved in exploration at present) and French nuclear fuel firm Orano, which does business in the country — remains unclear due to lack of details. A similar tax by Russia last year as an export tax had a profound impact on aluminum prices.

Crypto impact

On a side note, the biggest economic casualty of the unrest so far seems to have been crypto currencies.
A TRTWorld report advises the cost of the world’s main cryptocurrency, Bitcoin, fell 8% to below $42,000. Altcoins also suffered losses.
A significant decrease in the hash rate — the total computing power of mining equipment — was recorded in the pools that are widely used by Kazakhstanis. Experts associated Bitcoin’s slump with the government-imposed curtailment of internet in Kazakhstan during the riots.
The post quotes a study by the University of Cambridge Business School showing Kazakhstan ranks second among countries in terms of Bitcoin mining. Its share is 18.1%, trailing behind the U.S., which accounts for 35.4% of the global production of the main cryptocurrency.
Those that advocate crypto currencies as the safer haven to so-called fiat currencies (those not backed by a physical asset like gold, that it is suggested are based on misplaced belief as to the value of the economy behind the currency) should take note. Without a functioning economy to support economic activity, crypto currencies are even more vulnerable than so-called fiat currencies.
Back to metals, President Tokayev’s threats regarding mining taxes could ultimately have more impact on metal prices than the so far transitory effect of the riots. Watch this space for further details as events in Kazakhstan unfold.
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