Mining production decreased by 8.4% year-on-year in July, which financial services provider Nedbank says marks a sixth consecutive month of contraction in mining production.

The major negative contributors were gold with a decline of 19.7% and contribution of -3.1 percentage points; platinum group metals (PGMs) with 12.2% lower production and a contribution of -2.8 percentage points; and iron-ore, which recorded a 20.4% output slump and contributed -2.7 percentage points.

Nedbank says mining output was impacted by intense power outages in June and July.

Statistics South Africa (Stats SA) finds that seasonally adjusted mining production increased by 2.3% compared with June. This followed month-on-month changes of -0.9% in June and 1.8% in May.

Nedbank confirms that mining production performed better from a seasonally adjusted point of view, with gold mining, in particular, recording growth for the first time since January – with no labour strike-driven disruptions having occurred in recent months.

In the three months ended July 31, seasonally adjusted mining production increased by 0.2%, compared with the prior three months. In this regard, PGMs was a positive contributor, recording a 4.1% increase in production and contributing one percentage point.

The largest negative contributor to mining production in the three months ended July 31 was diamonds, recording a 15.9% fall in output and contributing -0.8 of a percentage point.

SALES

Stats SA reports that mineral sales increased by 4.3% year-on-year in July, with the largest positive contributor being coal, increasing by 84.3% and contributing 13.8 percentage points.

Chromium ore followed with a 94.5% increase in sales and contribution of 2.1 percentage points. Manganese ore and “other” metallic minerals also contributed positively with 1.9 percentage points each, for 45% and 99% higher sales, respectively.

Among the negative contributors to mineral sales in July were PGMs, recording almost 30% lower sales and contributing -12.8 percentage points, and iron-ore, which experienced a 28.7% slump in sales and contributed -4.6 percentage points.

Nedbank says that, although commodity prices have moderated over the past few months, they continue to offer support at elevated levels, compared with 2021 and pre-pandemic levels.

Relative to pre-pandemic levels, Nedbank says sales remain robust at an increase of 76.2%.

Seasonally adjusted mineral sales increased by 7.3% in July, compared with June, following month-on-month changes of -15.9% in June and 12.3% in May.

In the three months ended July 31, mineral sales increased by 5.3%, compared with the preceding three months.

Nedbank stresses that the outlook for mining remains clouded by intensifying domestic and global headwinds, with clear evidence of a loss of momentum in the global economy as countries experience deteriorating levels of activity, tighter financial conditions and ongoing geopolitical tensions.

For economies such as South Africa, a slowdown in global growth translates into lower demand for its commodity exports, which will negatively impact mining sales.

Additionally, Nedbank notes, weaker global demand will push commodity prices lower, adding further downward pressure.

However, the vulnerability of the rand amid a risk-averse global environment and weak domestic conditions will support mining profits.