After five consecutive months of production growth, South Africa's mine output contracted by 4.5% year-on-year in May, which Minerals Council South Africa economist André Lourens says "proved particularly challenging on two fronts".

Firstly, the escalation of the Middle East conflict intensified global economic uncertainty and disrupted oil trade flows through the Strait of Hormuz, through which a fifth of the world’s oil flows. As a result, petrol and diesel prices reached their highest levels for the year in May, increasing cost pressures across mining operations and supply chains.

"The disruption to global trade and heightened market uncertainty also weighed on commodity markets and production activity. This is reflected in May's production data, with all major commodities recording negative annual growth rates, with the exception of manganese and chrome.

The resilience of these two commodities was largely supported by stockpiling activity in China, South Africa's largest export market for these commodities, as consumers sought to secure supply amid heightened global supply uncertainty," he adds.

Secondly, Lourens points out, commodity price trends began to shift. Gold and platinum group metals (PGMs), which had enjoyed sustained price gains over recent months, saw prices retreat in May.

"This downward movement persisted through June and into July, signaling a moderation in the upward price cycle that had supported mining revenues and profitability."

Meanwhile, despite the decrease in output for May, production for the first five months of the year was 3.5% higher than for the first five months of 2025.

"However, the pace of expansion has slowed consistently over recent months, suggesting that the production recovery has not been sustained. Despite this moderation in annual growth rates, elevated commodity prices continue to support production activity on a month-on-month basis.

"In May, total mining production increased by 1.3% month-on-month, with gold production rising by 2.3% and production excluding gold increasing by 1.2%. The elevated levels in commodity prices, despite recent declines, help explain this short-term expansion in output," Lourens says.

He warns, however, that several commodity groups remain under pressure. Coal production for the first five months of the year was 5.8% lower year-on-year, "reflecting weak demand from Eskom amid declining electricity generation and consumption".

Iron-ore production for the five-month period was also 7.8% lower year-on-year on the back of persistent rail constraints.

"Diamonds warrant special mention. The industry is under severe pressure, with production declining by 6.1% and several operations announcing production stoppages and issuing Section 189 retrenchment notices. Without urgent measures to support the sector, further mine closures remain a real risk," Lourens comments.

PRICES & SALES
He further points out that, while prices for gold, PGMs and export coal have generally trended upward since mid-2025, this trend began to reverse in May.

Elevated commodity prices have, nevertheless, continued to support mineral sales, despite signs of softening in certain markets. 

"Total mineral sales from January to May were about R100-billion higher than during the corresponding period in 2025. The increase was driven primarily by exceptionally strong performances in the gold and PGMs industries.

"Over the same period, PGM sales were 109.4% higher than in 2025, while gold sales increased by 44.7%. Strong growth was also recorded in chromium (+37.3%) and nickel (+21.8%) sales. Overall, the surge in mineral sales reflects the substantial support provided by elevated gold and PGM prices during the first five months of the year," he notes.

Lourens states that, to unlock structural growth in South Africa's mining sector, lower the cost of doing business and improve global competitiveness, priority should be given to affordable electricity, accelerated logistics reform, expanded private sector participation in rail and transmission infrastructure, and targeted exploration incentives for the development of future mining production.

"In particular, the lower electricity tariff dispensation should be extended to the rest of the mining sector, which has seen the cost per kilowatt-hour of electricity increase by 1 185% since 2003; rail reform should be accelerated through increased private sector access and freight allocations, and the Independent Transmission Programme should be expedited to unlock investment and network expansion.

"Together, these measures would improve the operating environment, stimulate investment and support sustainable growth in the mining sector, which in turn stimulates downstream industries."