South African mining has had a “poor start” to the year, leaving investors “cautious” on the outlook for the mining sector for the year after seeing production “slipping deeper” into negative growth territory in January.
Mining production contracted 4.5% year-on-year, from a downwardly revised 1.2% fall in December.
Copper recorded the largest negative growth rate at -43.8%, followed by iron-ore at -26.3% and diamonds at -16.1%.
The main negative contributors to the 4.5% decrease were iron-ore, contributing a -5.8 percentage point decrease; copper, contributing -0.7 of a percentage point; and manganese ore, contributing -0.6 of a percentage point.
Gold emerged as a significant positive contributor with 3.1 percentage points.
Despite “some relief rally” in risk and a pick-up in global commodity prices in recent weeks, “the broad trends of choppy, weak commodity prices and demand for the foreseeable future are likely to continue on the gradual unwinding of the Chinese investment boom,” said BNP Paribas Securities South Africa economist Jeffrey Schultz in an update to clients.
“This, coupled with the various structural constraints to domestic growth, weak confidence and rising input costs, such as electricity prices, will continue to place pressure on the mining sector through 2016,” he said.
Seasonally adjusted mining production decreased 4.9% month-on-month in January 2016 – its largest monthly deterioration since April last year.
This followed month-on-month changes of -0.5% in December 2015 and 1.9% in November 2015.
Seasonally adjusted mining production decreased 0.6% quarter-on-quarter in the three months to January.
“On a [quarterly] seasonally adjusted and annualised basis mining production growth continued to contract in January (-2.1%) and looks unlikely to pull itself out of the doldrums in first quarter,” Schultz said.
Meanwhile, mineral sales increased 2.8% year-on-year in December 2015, with the highest positive contributors being nonmetallic minerals at 90.8% and contributing 3.1 percentage points; gold, with 18.2% and contributing 2.9 percentage points; and coal at 7.4% and contributing 2 percentage points.
Iron-ore, posting -25.7% and contributing -3.2 percentage points, and manganese ore, at -44.1% and contributing -2.1 percentage points, were two of the largest negative contributors during the month.
Seasonally adjusted mineral sales at current prices increased 2.9% month-on-month in December. This followed month-on-month changes of -2.1% in November and 1.3% in October.