Mining production increased 0.2% year-on-year in September, following a 3% year-on-year decline in August.

This was above consensus expectation of a 2.4% year-on-year decline for September, says Investec.

Statistics South Africa (Stats SA) reports that the biggest positive contributors to the increase were iron-ore, with output having risen 8.2%; other nonmetallic minerals, with output having increased 13.6%; and other metallic minerals, with output having risen by 38%.

The biggest negative contributors were diamonds, with a 15.7% decrease in output; manganese ore, with a 7.3% decrease in output; and platinum-group metals (PGMs), with a 2% decrease in output.

Seasonally adjusted mining production increased 1.5% in September, compared with August 2019. This followed month-on-month changes of 0% in August and a 5.1% contraction in July.

Seasonally adjusted mining production decreased 1.6% in the third quarter of the year, compared with the second quarter. The biggest negative contributor was PGMs, with a decrease of 8.2% in output.

Stats SA’s data showed that mineral sales had increased 15% year-on-year in September.

The biggest positive contributors were gold, PGMs, iron-ore, and other metallic minerals.

Seasonally adjusted mineral sales at current prices increased 0.8% in September, compared with August. This followed month-on-month changes of –1.4% in August and 3.3% in July.

In the third quarter of the year, the seasonally adjusted value of mineral sales at current prices was 1.1% higher, compared with the second quarter of the year.

Investec commented last week that the World Bank’s latest Commodity Outlook had shown that iron-ore prices had increased 1.2% in the third quarter, following four successive quarterly gains, with a rise in prices supported by supply disruptions in Australia as a result of bad weather and operational issues, and in Brazil, owing to Vale’s tailings dam accident and suspensions.

Additionally, robust steel production in China and the US, despite weak industrial demand, also supported prices, says Investec.

However, the World Bank stressed that 2020 should see a dip in prices, reflecting a recovery in supply from Brazil, overcapacity in the steel industry and soft global steel demand as industrial activity slows.

“Conversely, persistent production contractions within the diamond sector – with production falling for the fifth consecutive month in September – are reflective of the challenging rough diamond trading conditions in the midstream.

“These are projected to continue in the short term and are largely underpinned by high polished inventory levels. Added to this, the increased popularity of lab-grown diamonds remains a risk,” Investec notes.

Nedbank said prospects for strong growth in the mining sector remained weak on the back of elevated operational costs and an uncertain policy environment. Globally, hindrances are posed by heightened protectionism, softer demand and mostly stagnant commodity prices.

he bank added that mining output remained in line with other indicators of real economic activity, which reflected the generally subdued economic environment.