Amid poor global growth, lower commodity prices and local infrastructure constraints, mining production growth slowed to 2.7% year-on-year in May from 7.9% in April, Statistics South Africa has reported.
The highest positive production growth rate was recorded for platinum-group metals (PGMs), which grew by 99.6%, partly as a result of the low base in May 2014, when the PGM sector was adversely affected by industrial action.
Seasonally adjusted mining production decreased by 4.7% in May, compared with April, which followed a month-on-month contraction of 4.7% in April and growth of 6.9% in March.
On a quarterly basis, seasonally adjusted mining production increased by 4.1% in the three months ended May 31, compared with the previous three months, boosted chiefly by a 4.1% increase in PGMs output.
Mineral sales, meanwhile, increased by 4.5% year-on-year in April, with the highest positive contributions to the increase emerging from PGMs (57.3%),
chromium ore (45%) and coal (4.5%).
Conversely, growth in iron-ore sales decreased by 39.4% year-on-year and was a significant negative contributor.
Seasonally adjusted mineral sales at current prices increased by 3% in April, compared with March.
Recovery
Nedbank believes growth in mining production will continue to recover in the “very” short term, as the effects of last year's five-month platinum strike work through the base.
Noting that mining figures remain volatile and have little influence on policy decisions in the short term, the bank says in a statement that the poor climate for mining production is expected to hurt economic growth as the year progresses.
“While the Monetary Policy Committee (MPC) has signalled that the next rate move is up, factors such as the weak economy are likely to persuade the MPC to avoid tightening rates too soon.
“The MPC will also consider the rising consumer inflation rate and global monetary policy – especially the timing of US interest rate hikes – when deciding on rates. “We are still forecasting a rise in November,” it says.
BNP Paribas economist Jeffrey Schultz adds that the country’s disappointing monthly mining production performance continues to point to struggling industrial activity.
A further tail risk is the threat of a strike in the gold sector, with unions this week having rejected producers’ latest wage offer and the Association of Mineworkers and Construction Union declaring a dispute with the Commission for Conciliation, Mediation and Arbitration.
“Of course, unavoidable and temporary maintenance-induced production halts are partly to blame here, but there is also clear evidence from these numbers that a combination of weak demand, electricity supply cuts and falling global commodity prices is continuing to weigh on the ability of this industry to sustainably keep its head above water, even in the absence of significant industrial action.”