Mining production decreased by 29.8% year-on-year in May, as a result of the lockdown restrictions in South Africa.

This follows April’s (revised) unprecedented plunge of 50.3% year-on-year, says Investec, with restrictions on production, global growth concerns, together with supply chain disruptions and subdued domestic demand continuing to weigh on mining activity in May.

The largest contributors in May were iron-ore, with output down 66.3% and contributing -7.4 percentage points; and platinum group metals (PGMs), with output down 27.3% and contributing -6.6 percentage points.

Other big negative contributors to the month’s mining production were manganese, with output down by 45.5% and contributing -3 percentage points; other non-metallic minerals, with output down 46.7% and contributing -2.8 percentage points; and coal, with output down 9.6% and contributing -2.6 percentage points.

On the bright side, seasonally adjusted mining production increased by 44% in May compared with April. This followed month-on-month changes of -36.8% in April and -19.3% in March.

Seasonally adjusted mining production decreased by 31.3% in the three months ended May 31, compared with the previous three months.

The largest contributors were PGMs, with output down 45.3% and contributing -11.7 percentage points; iron-ore, with output down 61.7% and contributing -6.9 percentage points; gold, with output down 29.4% and contributing -3.8 percentage points; and other non-metallic minerals, with output down 41% and contributing -2.5 percentage points.

FNB comments that most mining operations were only permitted to operate at reduced capacity in May and that this transitory hurdle, combined with lower global demand for commodities, resulted in domestic mining production decreasing by 29.8% year-on-year in May.

The bank anticipates June’s mining output rate will improve relative to the prior two months, as most mining activity has been permitted to scale up toward operating at full capacity under Level 3 lockdown regulations. However, miners will still have to contend with several headwinds, including containing potential Covid-19 outbreaks, lower capacity use rates – owing to suboptimal operating conditions, load-shedding and weak external demand from trading partners.

In terms of the improved mining output recorded in May, Nedbank notes that the slight improvement is welcome as it signals that local production is starting to recover post the hard lockdown.

“The speed of any recovery, however, will depend on how quickly the country moves through the various stages of lockdown towards some semblance of normal operations – which could be [any time] between September this year or only in 2021.

“Either way, mining production will probably end 2020 lower, hurt by the much weaker global demand and commodity prices,” the bank states.

SALES FOR THE MONTH

Statistics South Africa reports that mineral sales decreased by 13.4% year-on-year in May.

The largest negative contributors were coal, at -21.2% and contributing -5.8 percentage points; manganese, at -41.1% and contributing -3.5 percentage points; PGMs, at -9.8% and contributing -2.5 percentage points; and chromium ore, at -50.4% and contributing -2.1 percentage points.

The only significant positive contributor for sales in May was gold at 58.6% and contributing 5.7 percentage points.

Seasonally adjusted mineral sales at current prices increased by 25.7% in May, compared with April. This followed month-on-month changes of -36.9% in April and 1.6% in March.

In the three months ended May 31, the seasonally adjusted value of mineral sales at current prices was 18.2% lower compared with the previous three months.