SA mining recovery to remain moderate, says economists after dim July data
ECONOMISTS said yesterday that the recovery of productivity and activity across South Africa's mining sector was expected to remain moderate, given the ongoing inefficiencies in port, rail and water supply sectors.
Latest data from Statistics South Africa (StatsSA) yesterday showed mining activity slumping by 1.4% on a year-on-year basis in July, although mineral sales for the same month increased by 24.5%.
Iron ore recorded the biggest slump at a negative 19% while other metallic minerals shed 36.2%.
Gold output was 3.5% weaker, despite higher bullion prices, although manganese ore production rebounded by 27%, in addition to a 23% firmer in output of chromium ore.
South Africa's mining activity for July also decreased by 0.9% compared to June output, following month on month of -1.7% in June and -0.9% in May.
Thanda Sithole, senior economist with FNB, said yesterday that the recovery in SA's mining sector activity was likely to remain sluggish in the short term outlook.
“Despite easing energy constraints and a stable global growth environment, recovery in mining activity is expected to remain moderate in the near term.
The ongoing inefficiencies in the port and rail industries continue to hinder productivity and profitability,” Sithole said.
“The sustained weakness into third quarter of 2024 reflected declines in seven out of twelve mining divisions.”
Mining production over the quarter to July decreased by 2.5% compared with the previous three months.
The largest negative contributors for this period were PGMs at -4.8%, iron ore at a negative 9.5% and gold, which retreated by 3.9%.
Lara Hodes, economist at Investec, said in addition to a still largely lacklustre global growth environment, South Africa's mining sector continues to face a number of domestic “structural challenges, including a fragile water supply infrastructure which has deteriorated over the years (in part) due to lack of acceptable” maintenance.
“Moreover, while progress has been made on the logistics front, inefficiencies at the ports and an unstable railway network continue to weigh on optimal activity and export potential,” added Hodes.
In terms of sales, data from StatsSA showed mineral sales increasing by 24.5% year-on-year in July 2024.
The largest positive contributors included gold which had 117.5% higher sales, boosted by the allure of firmer bullion prices and manganese ore which was 70.8% higher.
Platinum group metals (PGM), riding on higher production and restructuring of operations to contain costs but dragged down, was also stronger by 16.3% in July in terms of sales, while coal was also firmer by 13.3%.
On the downside, sales of iron ore slumped by a negative 31.4%.
On a seasonally adjusted basis,
SA's mineral sales at current prices decreased by 0.1% in July 2024 compared with June 2024, following month-on-month changes of 19.5%
in June 2024 and -7.5% in May 2024.
But sales for the three months to July 2024 firmed up by 9.6% compared to the previous three months.