South Africa's mining output contracts again, but mineral sales accelerate

10th November 2022

By: Creamer Media Reporter


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South Africa's mining production contracted by 4.5% year-on-year in September.

The largest negative contributors were iron-ore (-23.1% and contributing -2.7 percentage points) and gold (-12.4% and contributing -2.1 percentage points).

Financial services provider Nedbank's Economic Unit points out that the September reading marks an eighth straight month of contraction.

"The last time we observed consecutive contractions of this magnitude was between February 2020 and February 2021, at the height of the Covid-19 pandemic.

"The current output levels can mainly be attributed to ongoing power supply disruptions," the unit states.

Statistics South Africa reports, however, that seasonally adjusted mining production increased by 0.1% in September, compared with August. This followed month-on-month changes of -0.6% in August and 2.5% in July.

Seasonally adjusted mining production increased by 2.2% in the third quarter, compared with the second quarter. The largest positive contributors were gold (9.6% and contributing 1.3 percentage points); diamonds (20.4% and contributing 0.9 of a percentage point); coal (3.2% and contributing 0.8 of a percentage point); and manganese ore (10.2% and contributing 0.7 of a percentage point).

Meanwhile, mineral sales at current prices increased by 20.7% year-on-year in September. The largest positive contributors were coal (63.1% and contributing 14.1 percentage points); gold (122.4% and contributing ten percentage points); ‘other’ metallic minerals (164% and contributing 3.1 percentage points); and manganese ore (33% and contributing 1.7 percentage points).

Platinum-group metals (-22.9% and contributing -8.8 percentage points) and iron-ore (-18.2% and contributing -2.6 percentage points) were significant negative contributors.

Nedbank's Economic Unit noted that the acceleration in mineral sales in September had occurred at the fastest pace since the start of this year.

"Although commodity prices have moderated from their early 2022 highs, some commodities have continued to offer support. Coal prices, in particular, have edged higher this year due to supply concerns related to the Russia-Ukraine war and Europe’s consequent ban on Russian coal," it pointed out.

The unit commented that the mining sector's performance would remain precarious in the months ahead amid a dim economic outlook.

"Demand conditions will deteriorate, given the expected slowdown in the global economy, particularly in advanced countries, some of which are key markets for South Africa. China, which faces recurring Covid-19 waves and consequent restrictions further exacerbates the weaker demand outlook.

"The prices of most of South Africa’s key commodities have moderated over the course of the year, indicating that the country is benefiting less on the value front.

"However, coal demand and thus, prices should remain supportive on the back of ongoing supply concerns sparked by Europe’s ban on Russian coal and increased demand from Asia. On the domestic front, persistent power supply disruptions remain a threat to output," it stated.


Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online


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