Mining News Pro - South Africa’s mining production decreased by 1.6% year-on-year in 2018, following a 3.9% year-on-year increase in 2017 and a decrease of 3.7% year-on-year in 2016, Statistics South Africa (Stats SA) revealed on Thursday.
According to Mining News Pro - In December, mining production decreased by 4.8% year-on-year, with the main negative contributors being gold production, which contracted by 31% and contributed -4.6 percentage points; iron-ore production, which contracted by 14.3% and contributed -2.1 percentage points; copper production, which fell by 30.8% and contributed -0.3 of a percentage point; and chromium ore, which was down 9.3% and contributed -0.3 of a percentage point.
Seasonally adjusted mining production decreased by 1.2% month-on-month in December, compared with the 6.5% month-on-month contraction in mining production in November and the 3% month-on-month increase in output in October.
Investec commented that the export of resources is a key driver of economic growth in South Africa and, while commodity prices have ticked up moderately of late, they remain subdued, underpinned by a weakened international trade and investment backdrop, with the escalation in global trade tensions a persistent risk.
“Additionally, the domestic mining sector, which is heavily reliant on stable, affordable electricity supply, continues to be hindered by intermittent supply disruptions, with load-shedding a current reality.”
Investec further pointed out that while rising costs are already a concern for the mining industry, an application for further electricity tariff increases for the next three years, submitted to the energy regulator by Eskom, will place further pressure on mines’ cost of production, should they be enforced.
It added that, hopefully, with the government’s assurance that it is determined to work with mining companies, unions and communities to grow the mining sector, coupled with regulatory and policy reform, the country will be able to attract much-needed investment into this significant sector.
Nedbank, meanwhile, stated that mining production is expected to recover some lost ground off a low base early in 2019, before stabilising for the rest of the year.
However, the bank said downside risks remain significant, given the prospect of slower global growth and concerns around Chinese growth, as well as trade tensions between the US and China.
Nedbank added that domestic cost pressures and difficult operating conditions, such as the current electricity crisis, will also add to downside risks.
“The pace of economic recovery remains slow, as evidenced by the weak December mining production statistics. Consequently, there is no evidence of demand pressure on prices and cost-push pressures on prices also appear much more contained.
“Given these forces, inflation is likely to remain relatively contained. This should be sufficient to convince the South African Reserve Bank’s Monetary Policy Committee to leave interest rates on hold until around November, when the committee is likely to resume its mild tightening cycle.”
SALES
Meanwhile, Stats SA on Thursday also reported that the country’s mineral sales had increased by 5.2% year-on-year in 2018, following year-on-year increases of 8.4% in 2017 and 12.9% in 2016.
Mineral sales increased by 17.4% year-on-year in December, with the largest contributors being platinum-group metals, which increased by 26.9% and contributed 5.6 percentage points; coal, which increased by 19.3% and contributed 5.4 percentage points; iron-ore, which increased by 41.3% and contributed 4.1 percentage points; and manganese ore, which increased by 44.8% and contributed 3.3 percentage points.