Mining output in South Africa has remained firmly in contractionary territory after falling more than expected in October due to a number of headwinds facing the industry.
Data from Statistics South Africa (Stats SA) yesterday showed that mining production in South Africa slipped by 10.4% year on year in October, following an upwardly revised 5.1% decline in September.
This was the ninth consecutive month of falling mining activity and to the greatest extent since April, partly due to persistent and extensive load shedding.
Investec economist Lara Hodes said electricity production and consumption numbers published by Stats SA for October revealed that generation fell by a marked 8.2% y/y and by 6.9% month-on-month seasonally adjusted.
“Domestically, persistent and heightened load shedding continues to weigh heavily on the energy intensive mining sector and remains a key downside risk to the country’s growth potential,” Hodes said.
“Domestically, the mining sector continues to deal with significant logistical challenges. Export activity was heavily impacted by the Transnet strike, which commenced on October 6, compelling Transnet Port Terminals to declare a force majeure,” she said.
Stats SA said the largest negative contributors were platinum group metals, gold, diamonds, and manganese ore.
Stats SA’s principal survey statistician, Juan-Pierre Terblanche, said there were both positives and negatives in the reading for the mining output in October.
“Platinum group metals was the largest negative contributor, declining by 32.5% year on year. Manganese ore, nickel, chromium ore, and iron ore also performed poorly in October,” Terblanche said.
“On the other side of the coin, two sectors reported positive results. Copper production was up by 15.8%, while coal output increased by 2.9% year on year.”
On a seasonally adjusted monthly basis, mining production shrank by 2.5% following a revised 0.1% downtick in September.
This represents a third consecutive monthly decline in mining production.
Nedbank economist Crystal Huntley concurred that erratic power supply, inflationary pressures, supply chain disruptions and the challenges associated with illegal mining continued to restrict production.
“The mining sector is unlikely to recover in the year ahead amid the weaker global economic outlook, and challenging operating environment,” Huntley said.
“The buoyant demand for some commodities, such as coal and copper will be offset by domestic supply constraints and a decline in demand for other commodities, on the back of an expected slowdown in the world economy.
“Additionally, the prices of most of South Africa’s leading commodities will continue to moderate in the new year and decrease the value of mineral sales,” Huntley said.
BUSINESS REPORT