Mining output performs well, but off a low base

10th June 2021 By: Marleny Arnoldi - Creamer Media Online Writer

Mining output has increased by 116.5% year-on-year in April, after having increased by 22.5% year-on-year in March.

The largest contributors were platinum group metals (PGMs), growing by 276%; gold, growing by 177%; manganese ore, growing by 208%; and iron-ore, growing by 149%.

Financial services provider FNB comments that total mining output, unsurprisingly, spiked in April, coming off the lockdown-induced low base in the second quarter of 2020, which will likely mean that there will be double-digit year-on-year mining output growth in May too.

Despite the solid annual growth rate in April, seasonally adjusted mining production, which aligns with the official calculation of quarterly real gross domestic product (GDP) growth, grew by a mere 0.3% month-on-month in April, following monthly average growth of 3.2% between January and March.

The solid growth momentum in the first quarter of last year showed up in the sector’s real GDP, which posted robust growth of 18.1% quarter-on-quarter annualised, contributing 1.2 percentage points to overall real GDP growth.

Continued monthly growth momentum in mining production will be critical for the second-quarter GDP outcome, FNB says.

The bank’s near-term outlook for the mining sector remains intact. It expects mining activity to be supported by the sustained higher commodity prices from last year and the anticipated robust economic growth rebound, mainly from South Africa’s major trading partners.

Nedbank agreed that analysing the usual year-on-year numbers would be meaningless and also focused its discussion on the seasonally adjusted month-on-month outcomes in April, as well as figures from prior years.

The 0.3% rise in month-on-month mining output in April was supported by PGMs, growing 6.8%; manganese, growing 5.9%; and coal, growing 4.6%.

This while copper, chrome and gold output declined significantly over the reporting period, by 49.6%, 10.9% and 9.6%, respectively.

The three-year April average indicates that total production levels are 4.9% higher in April this year.

Nedbank says mineral sales continued on an upward trajectory in April, growing by 3.2% month-on-month from 17.2% in March. Sales continued to benefit from increased global demand, strong commodity prices and improved operations at major ports.

By the three-year average, sales were exceptionally higher, up 100.8%, driven by PGMs and iron-ore, recording sales growth of 334% and 135%, respectively. By the same comparison, chrome and manganese ore sales declined.

Nedbank says that, despite the statistical base effects, the mining sector performed well in April, having been supported by higher global demand.

Looking ahead, the sector faces counter-balancing factors.

On the international front, improving industrial activity and high commodity prices will support activity; however, locally, the resumption of load-shedding and uncertain legislative framework pose imminent downside risks.

The bank adds that a worsening of the Covid-19 wave of infections and the associated restrictions on economic activity remain a threat to the pace of recovery.