JOHANNESBURG (miningweekly.com) – Despite a marginal hike in mining production in July, proponents expect output to track downwards during the second half of the year as the recovery effect after last year's platinum mining strike starts to wane.

Annual mining production growth increased from a revised 5.4% in June to 5.6% in July, on the back of a 71.8% year-on-year increase in platinum group metals (PGMs) output, which added 7.9 percentage points.

The platinum sector’s continued growth from a low base, caused by protracted strike action last year, would “fade” during the second half of the year, ultimately leading to a slowdown in mining production growth, BNP Paribas Cadiz Securities economist Jeffrey Schultz
 explained.

“Weaker global commodity prices, slowing global trade volumes and weaker Chinese demand are all [also] likely to be large headwinds to the domestic mining sector – not to mention the more idiosyncratic factors, such as electricity supply constraints, rising input costs and further threats of strike activity in the gold and coal sectors,” he added.

Nedbank’s Economic Unit echoed these views, noting that the outlook for South Africa’s mining sector remained poor.

Besides PGMs, the highest positive growth emerged from manganese ore at 21.3%, contributing 1.2 percentage points, chromium ore at 10.3% and diamonds at 9.9%.

The month’s negative contributors included iron-ore, which contracted by 8.6% and contributed a negative 1.9 percentage points, and gold, contracting 7.4% and contributing -1.2 percentage points.

On a seasonally adjusted month-on-month basis, mining production increased 1.1% during July, owing to a strong 18.7% month-on-month surge in iron-ore production, following a 6.9% contraction in June.

Schultz, however, raised concern over the 2.9% month-on-month decline in PGMs production and a 4.4% fall in gold production, which collectively shaved off 1.5 percentage points from the monthly performance.

Meanwhile, mineral sales increased 11.3% year-on-year in June, with the highest positive contributions emerging from PGMs, with 72.4% growth and contributing 11.7 percentage points; gold, growing 11.8% and contributing two percentage points; and other nonmetallic minerals, rising 19.7% and contributing 1.3 percentage points.

Iron-ore was a significant negative contributor during the period under review, decreasing 30.6% year-on-year, and contributing a negative five percentage points.

Seasonally adjusted mineral sales at current prices decreased by 1.2% in June, when compared with May, following month-on-month changes of 0.4% in May and 1.4% in April.