Mining production in South Africa decreased by 5.2% year-on-year in July, following a 3.7% year-on-year rise in June, mainly as a result of declines in the production of gold, iron-ore, coal and platinum-group metals (PGMs).
According to Statistics South Africa (Stats SA), gold decreased by 15%, contributing -2.4 percentage points; iron-ore decreased by 17.4%, contributing -2.3 percentage points; and coal and PGMs decreased by 5.8% and 6.2% respectively, contributing -1.5 percentage points and -1.3 percentage points, respectively.
On a more positive note, however, diamond production was a significant positive contributor, achieving a growth rate of 40.7% and contributing 2.3% points.
On a seasonally adjusted basis, mining production declined by 8.6% month-on-month in July and increased by 3.3% quarter-on-quarter for the three months to July 31.
The main drivers of the quarterly increase, Stats SA noted, were PGMs and diamonds, which added 2.6 and 2.7 percentage points, respectively, to the quarterly number.
This followed month-on-month changes of 5.4% in June and 5.3% in May.
Mining sales, meanwhile, decreased by 1.7% year-on-year in July as a result of declines in coal, gold and iron-ore.
Coal decreased by 6.3%, contributing -1.9 percentage points, while gold decreased by 7.4%, contributing -1.5 percentage points.
Iron-ore sales saw the biggest drop at 14.2%, which contributed -1.4 percentage points.
Manganese ore, however, was a significant positive contributor to mining sales, seeing an increase of 26.6% and contributing two percentage points.
On a seasonally adjusted basis, mineral sales at current prices decreased by 7.2% in July, compared with June.
This followed month-on-month changes of 1.6% in June, and 4.8% in May.
In the three months ended July 31, the seasonally adjusted value of mineral sales at current prices was 5.2% higher compared with the previous three months.
Despite the mining figures being volatile, financial services provider Nedbank’s group economic unit believes stronger global demand should offer some support for production and export volumes during the rest of the year.
The upside of which, the institution said in a statement, will probably be tempered by softer commodity prices, as well as a generally difficult operating and policy environment.
According to Nedbank’s statement, weak economic growth supports a neutral to easier monetary policy stance. However, it warned on Thursday that upside risks to the inflation outlook have increased since the July Monetary Policy Committee (MPC) meeting, as the rand has depreciated further, and international oil prices rose.
The risks of near-term tightening have therefore increased, Nedbank warned.
The MPC, the institution noted, has stressed that its focus will be on countering any second-round inflationary effects from the currency or other cost-push factors.
“We, therefore, still believe the MPC will try to keep rates steady for as long as possible given the weak economy and the absence of any strong rise in inflation expectations. Interest rates are likely to remain unchanged until the second half of 2019, but this outlook could change if negative factors persist.”
Financial services provider Investec lamented, in a separate statement, that commodity prices have suffered as of late and are, according to the Economist base metals index, down by about 16% since January.
This, the provider explained, has been exacerbated by a global climate of rising geopolitical tensions and heightened trade concerns, which Investec believes has reinforced investor concerns over global growth and is threatening demand.
Additionally, Investec said domestic factors – including mounting costs and persistent policy uncertainty, particularly around the Mining Charter and land expropriation without compensation – continue to cloud investor confidence and impede “much-needed investment into the sector”.