Mining production up 2.1% y/y in October, buoyed by PGMs

9th December 2021 By: Donna Slater - Creamer Media Contributing Editor and Photographer

Statistics South Africa (Stats SA) reports that mining production increased by 2.1% year-on-year in October, with the largest positive contributor being the platinum group metals (PGMs) sector, which was 24% up, contributing 5.5 percentage points.

Chromium ore increased by 28.7%, adding 0.9 of a percentage point, while iron-ore increased by 11.5%, contributing 0.8 of a percentage point.

The coal sector declined by 9.9%, subtracting 2.8 percentage points from the overall tally.

Financial services provider Nedbank reports that the increase in production beat market expectations of a contraction.

Nedbank reports that Stats SA applied new weights to the mineral groups in its statistics, with the updated weights being calculated using the value added from the rebasing and benchmarking of the national accounts.

In a note, financial services provider FNB economist Thanda Sithole says the release of the October mining data, along with the new production weights, created some retrospective growth revisions.

“[This could imply] that the mining sector’s gross domestic product [GDP] growth contribution to the overall quarterly GDP growth could be revised when the fourth-quarter GDP data is released early next year.”

This, he says, may or may not have a material impact on the headline quarterly GDP growth.

From September, seasonally-adjusted mining production increased by 3.4% in October following month-on-month changes of -4.4% in September and 0.8% in August.

For the three months ended October 31, seasonally-adjusted mining production increased by 0.1% compared with the previous three months. The largest positive contributor was the diamonds sector, which was 21.8% up, contributing 0.8 of a percentage point.

Iron-ore, meanwhile, increased by 4%, adding 0.4 of a percentage point, while PGMs were 1.5% up, contributing 0.3 of a percentage point.

As for mineral sales, Stats SA reports that year-on-year for October, sales at current prices increased by 4.8%; with the largest positive contributor being coal, which was 58.5% up, adding 9.7 percentage points. Iron ore was 28.4% up, contributing 2.6 percentage points.

Gold, however, was 37.9% down, subtracting 7.2 percentage points from the overall tally.

Compared with September, seasonally-adjusted mineral sales at current prices increased by 12.2%, following month-on-month changes of -24.2% in September and 1.1% in August.

Compared with the previous three months, the seasonally-adjusted value of mineral sales at current prices was 12.1% lower in the three months ended October.

Despite production levels falling for the past six months, coal sales remained robust, up by 58.5% year-on-year, adding 9.7 percentage points to the total.

“Mining production and sales defied the odds, advancing in October despite severe power outages,” states Nedbank, adding that the outlook remains murky on the back of renewed lockdowns across the globe, further spells of load-shedding and likely domestic restrictions amid the fourth wave of Covid-19 infections.

However, Nedbank says the good news is that high commodity prices and the weaker exchange rate should help shelter the industry from possibly lower volumes.

Sithole says FNB maintains its view that mining activity should continue benefiting from the recovery in South Africa’s trading partner economies and reasonably higher commodity prices.

“Nevertheless, the mining sector faces several challenges ranging from shipping delays and costs, to load-shedding, as well as higher electricity and water costs.”