South Africa’s mining production fell by 9% year-on-year in November last year Statistics South Africa (Stats SA) reports in its latest mining production and sales report.
The 9% decline is a slight improvement over the 11% year-on-year dip that was recorded in October. However, financial services firm Investec noted on January 17 that the November result was weaker than consensus expectations of a 6.5% decline, as reported by information service Bloomberg.
According to Stats SA, seasonally adjusted mining production decreased by 0.4% in November compared with October. This followed month-on-month changes of -3% in October and -0.3% in September last year.
A 22% decrease from November 2021 to November 2022 was recorded in the production of platinum group metals (PGMs), which detracted 5.9 percentage points from the topline reading, Investec said, adding that this was chiefly responsible for the yearly fall in mining production.
Meanwhile, declines in the production of iron-ore of 19.4% and diamonds, of 21.5%, detracted a further combined 3.1 percentage points from the total.
According to the World Bank, platinum prices have been afflicted by “monetary and macroeconomic factors affecting other metals, notably high interest rates and weak industrial and jewellery demand amid a global economic slowdown”.
Investec noted that the global manufacturing slump intensified in November, according to S&P Global evinced by the JP Morgan Global Manufacturing PMI gauge which dipped to a 29-month low.
Moreover, results from the S&P Global Steel Users PMI Survey for November revealed the sharpest decline in the “global steel-using sector since May 2020” relating to today’s Stats SA’s mining production publication for November.
Domestic, persistent and heightened loadshedding continues to weigh heavily on the energy intensive mining sector and remains a key downside risk to the country’s growth potential, Investec noted.
November’s electricity production and consumption numbers published by Stats SA revealed that generation fell by a further 1.7% year-on-year, while distributed electricity declined by 2.3%.
According to the Minerals Council South Africa, the recently announced “18.65% and 12.74% [electricity] tariff increases mean the mining industry’s electricity costs will increase by R13.5-billion, or 33.7%, to R53.5-billion by the end of 2024”.
Accordingly, electricity costs will now constitute about 12.5% of the sector’s expenses “by the end of 2024 from about 9% now”.
Certain industry subsectors will be worse afflicted than others. Specifically, “the share of energy in intermediary inputs will increase from 24% to 38% in gold mining, from 22% to 37% in iron ore mining, and from 13% to 19% in the PGMs sector”, the Minerals Council said.
Besides the dire electricity supply predicament, logistical challenges continue to impede operational performance, underpinned by, among other factors, aging infrastructure and vandalism.
“The hastened implementation of key reforms is needed to boost sentiment and attract investment,” Investec said.
In terms of mineral sales at current prices, Stats SA reported a decrease of 15.2% year-on-year in November. The largest negative contributors to this were PGMs, which dipped 23.7%, contributing -8.9 percentage points; gold, which fell 54.9% and contributed -8.4 percentage points; and iron ore, which fell by -40.2% and contributed -3.8 percentage points.
Seasonally adjusted mineral sales at current prices decreased by 10.4% in November compared with October last year. This followed month-on-month changes of -6.5% in October and -3.2% in September.
Meanwhile, Stats SA said that mineral sales at current prices decreased by 9.8% in the three months ended November 2022, compared with the previous three months.