Mining production rose by a modest 0.7% in April, after declining by -4.8% year-on-year – revised from -5.8% year-on-year – in March, data published by Statistics South Africa (Stats SA) shows.
Commenting on the statistics, Investec economist Lara Hodes says output was weaker than consensus expectations of a 1.1% year-on-year increase in production.
Hodes explains that a breakdown of the data indicates that the platinum group metals grouping was the largest positive contributor to the headline reading. Investec notes that production rose by a notable 16.9% year-on-year at the start of the second quarter and, owing to its substantial size in the mining basket, of 26.05%, it added 4.3 percentage points.
She says that, according to the World Platinum Investment Council, global demand for platinum rose in the first quarter of the year, supported by an uptick in jewellery demand and growth in the automotive sector. Despite this, the sector continues to face a number of challenges.
Moreover, chromium ore output grew by 20.8% year-on-year, adding a further 0.9 of a percentage point to the headline outcome.
However, eight of the twelve mineral categories included in the index contracted when compared with the same period last year, preventing a larger lift in April’s reading.
Notably, manganese ore, iron-ore and coal output fell by 22.5%, 7.5% and 3.6% year-on-year, respectively.
“Recent weakness in iron-ore prices – the main input for steel production – has largely reflected increased seaborne supply from Australia and Brazil, resulting in higher port stocks in China,” according to the World Bank’s Commodity Markets Outlook (April). Specifically, it was down by about 17% year-on-year for the year-to-date (to April).
Domestically, Hodes notes that the energy intensive mining sector likely benefitted from a suspension in rotational loadshedding during the month; however, it continues to face a number of other structural challenges including a fragile water supply infrastructure which has deteriorated over the years owing to lack of acceptable maintenance.
Moreover, while progress has been made with regard to easing congestion at the ports, South Africa’s logistical challenges continue to weigh on activity and export potential.
According to Stats SA, year-on-year key growth rates in the volume of mining production were -4.8% in March, and 0.7% in April. It reports that key growth rates month-on-month seasonally adjusted were -4.4% in March and 0.8% in April, while key growth rates three-month seasonally adjusted were -1.4% in March and 0.1% in April.