JOHANNESBURG (miningweekly.com) – South Africa’s headline mining production grew 3.6% year-on-year in May, but contracted -0.2% from the downwardly revised month-on-month decrease in April over March, of -1.4%.
The three largest positive contributors to the headline improvement in mining activity came from iron-ore production, which increased by 28.6% year-on-year and 4.1 percentage points; diamond production, which increased by 61% year-on-year and 1.7 percentage points; and manganese production, which increased by 18.1% and one percentage point, said BNP Paribas Securities South Africa economist Jeffrey Schultz on Thursday.
The largest negative contributors in May were precious metals, with platinum-group metals (PGMs) sliding 17.5% year-on-year and by 4.3 percentage points and gold dropping 3.4% year-on-year and by 0.4 percentage points.
However, on a seasonally adjusted month-on-month basis, production slipped for the second straight month, falling 0.2% from a revised 1.4% contraction in April.
“Most of the fall in monthly production growth came from an 8.4% slide in iron-ore production, which shaved off 1.2 percentage points from May’s production performance,” said Schultz.
Other sizeable monthly contractions came from copper and building materials production, which decreased by 28.9% and 15.2% respectively, though these commodities’ contributions were much smaller, given their smaller weightings in the basket.
However, Schulz highlighted it as “encouraging” that eight of the 12 mining sub-divisions tracked by Statistics South Africa managed to record a positive production growth performance in May.
The largest positive contributions came from diamond production, which increased by 48.5% month-on-month and gold production, which increased by 0.8% month-on-month. PGMs production was flat in May.
“An improved terms of trade environment for South Africa (commodity-price driven), alongside still favourable base effects, continues to prop up headline mining production growth,” he pointed out.
Schultz added that, while it seems likely that the sector will register its second consecutive quarter of positive contributions to quarterly’s gross domestic product growth, momentum growth in the quarter is likely to have slowed, given the recent softness in global commodity prices.
“At home, the mining sector also continues to face a number of headwinds related to ongoing policy and regulatory uncertainty, with a plethora of legal battles contesting the recently revised Mining Charter [that] have already kicked off.
“This continues to damage sentiment in the sector and is unlikely to spell good news for investment activity and employment in mining for at least the remainder of the year,” concluded Schultz.