Mining production increased by a modest 0.7% in April, after experiencing a decline of 4.8% in March, as reported by Statistics South Africa (Stats SA).
Economist Lara Hodes from Investec pointed out that the output in April was weaker than anticipated. The general consensus was that there would be a 1.1% year-on-year increase in production. A detailed breakdown of the data shows that the platinum group metals (PGMs) were the main positive contributors. Production in this sector rose by 16.9% year-on-year, contributing 4.3 percentage points due to its significant share in the mining basket.
The World Platinum Investment Council reported a global demand increase for platinum in the first quarter, driven by higher jewelry demand and growth in the automotive sector. Despite this, the sector faces ongoing challenges.
Chromium ore output grew by 20.8% year-on-year, contributing 0.9 percentage points to the overall increase. However, eight of the twelve mineral categories contracted compared to last year, limiting April’s growth.
Manganese ore, iron ore, and coal production fell by 22.5%, 7.5%, and 3.6% year-on-year, respectively. The World Bank’s Commodity Markets Outlook highlighted that iron ore prices have declined due to increased supply from Australia and Brazil, leading to higher port stocks in China. Iron ore prices were down by about 17% year-on-year through April.
Hodes pointed out that South Africa’s energy-intensive mining sector likely benefited from a suspension in rotational load-shedding during April. However, the sector still faces structural challenges, including a fragile water supply infrastructure due to years of inadequate maintenance. Additionally, logistical issues at ports continue to hinder mining activity and export potential, despite some progress in easing congestion.
Stats SA reported that key growth rates for mining production were -4.8% in March and 0.7% in April year-on-year. Month-on-month seasonally adjusted growth rates were -4.4% in March and 0.8% in April. The three-month seasonally adjusted growth rates were -1.4% in March and 0.1% in April.
The mixed results indicate that while certain sectors like PGMs and chromium show promising growth, the overall mining industry in South Africa continues to face significant challenges. The industry must address structural issues and improve logistical efficiencies to achieve more consistent growth.
Source: Mining Weekly
