November mining production down 5.6% y/y  

South Africa’s mining production decreased by 5.6% year-on-year in November.

Statistics South Africa on Tuesday reported that the largest contributors to the decrease had been the iron-ore, gold, diamonds and other non-metallic minerals sectors.

Commenting on the report, Investec indicated in a statement on Tuesday that this outcome was notably below market expectations.

Further, seasonally adjusted mining production decreased by 5.8% month-on-month in November.

This followed month-on-month increases of 3% in October and 0.7% in September.

Seasonally adjusted mining production for the three months ended November decreased by 1.5% compared with the previous three months.

The largest negative contributors were diamonds, iron-ore and gold, while the largest positive contributors were platinum group metals (PGMs) and manganese ore.

Meanwhile, mineral sales increased by 8% year-on-year in November, with the largest positive contributors being iron-ore, coal, PGMs and manganese ore.

Gold and ‘other’ nonmetallic minerals were considerable negative contributors.

Nedbank expects mining production to recover some lost ground early this year, before stabilising for the remainder of the year.

It warned, however, that there were significant downside risks, including slower global growth and concerns around Chinese growth, as well as trade tensions.

Investec commented that domestic mining activity continued to be hindered by operational inefficiencies and rising costs of fundamental inputs, including rising electricity and water tariffs.

Moreover, it pointed to productivity concerns and declining ore grades continuing to impact the sector. 

“Exports of resources remain a key driver of economic growth in South Africa and a further slowdown in commodity prices would negatively affect both the rand and economic growth. An escalation in global trade tensions against a backdrop of softening international trade and investment would exacerbate such an outcome.”

However, the company is anticipating an increase in both policy and political certainty post the 2019 national elections.

Investec expects this, combined with a more transparent mining charter and an expected moderate tick up in growth to around 1.7% year-on-year for the year will propel a lift in confidence, thereby bolstering investment in the mining sector.