Mining production contracted by a steep 6% year-on-year in February following an upwardly revised acceleration of 1.7% in January.

This is the largest contraction recorded since January 2021, when production fell by 7.8%.

Iron-ore, platinum group metals (PGMs), and gold declined the most, shaving off a combined eight percentage points from the headline figure, according to financial institution Nedbank’s mining production update issued on April 14.

The update agreed with Statistics South Africa’s (StatsSA’s) recently published ‘Mining: Production and sales, February 2022’ which showed that, ‘after contracting for most of the second half of 2021 and recording a marginal acceleration in January, coal production increased by 5.6% year-on-year, contributing 1.5 percentage.

Diamond production also rose over the reporting period, increasing by 21.7% year-on-year.

Over the month, mining production contracted by 6.4% compared with the upwardly revised 6.2% in January. The monthly drag came from nickel, iron-ore and other metallic minerals.

Nickel production contracted by a hefty 35.8%. Other non-metallic minerals and copper production increased by 5.8% and 4.7%, respectively.

Over the three months to February 28, production decreased by 3.8%. During this period, PGMs, gold and iron-ore were the main contributors, shaving off 2.2 percentage points, 1.2 percentage points and 1.1 percentage points, respectively.

Relative to February 2017 to 2019 levels, output was down by 6.1%, with the biggest drag stemming from copper, nickel, iron-ore and gold production.

After declining in January, mineral sales rebounded by 6.4% year-on-year in February. The increase in sales comes on the back of historically high commodity prices fuelled by Russia's invasion of Ukraine.

Sales were mainly lifted by cool, other non-metallic minerals and PGMs, all adding 10.6 percentage points, 2.3 percentage points and 1.8 percentage points, respectively.

StatsSA said gold and iron-ore were the main negative contributors, shaving off a combined 7.8 percentage points. For the three months to February, mineral sales were up by a modest 0.7%.

However, relative to pre-pandemic levels – February 2017 to 2019 – sales remained strong, up by 63.5%, reflective of the supportive commodity prices.

Nedbank said mining sector activity should remain supported by the Russia-Ukraine war-driven surge in commodity prices for the rest of this year.

Mining company profits, in particular, will remain robust as long as the war per sists and sanctions on Russian commodities remain in place.

A possible weakness might occur in the rand amid geopolitical tensions, intensifying global inflationary pressures and consequent tightening in advanced economy monetary policy will also offer some support, Nedbank said.

Ultimately, the mining sector would continue to benefit in terms of price but not volume as production capacity remains constrained by structural issues such as electricity shortages, potential labour disputes and infrastructural inefficiencies.