Statistics South Africa (Stats SA) has reported that seasonally adjusted total mining production declined by 0.6% month-on-month in May. This follows a 0.8% month-on-month rise in April.
In level terms, Minerals Council South Africa notes, real mining output remains well below the peak so far in 2024, attained in February. Because of this, and even assuming some recovery in the June output figures, mining production looks set for a quarterly decline in the second quarter.
This follows a contraction of 4.7% quarter-on-quarter in the first quarter of this year.
In addition, the Minerals Council points out that total mining production remains a notable 7.4% below its pre-Covid level of December 2019.
“To put this poor performance into perspective, the level of real manufacturing production was 2.5% lower in May than during December 2019,” it says.
On a more positive note, for the first five months of this year, mining production increased by 0.9% year-on-year. The Minerals Council reiterates that total real mining output declined by 7.2% in 2022 and by a further 0.3% in 2023.
It explains that the improved year-on-year performance was supported by higher production of diamonds, while chrome output continues to “shoot the lights out”.
Considering the sustained absence of mining sector load curtailment in May, the council says the monthly output decline may seem perplexing at first glance.
In terms of the larger weighted subcomponents, gold production was down by 4.6% month-on-month, while output of platinum group metals (PGMs) declined by a significant 11% month-on-month.
“Regarding the latter, this is most likely just a normalisation from an (unexpectedly) robust performance in April. The level of output in May aligns better with the restructuring currently experienced in the PGM sector.
“With this in mind, we expect PGM output to remain subdued for the rest of the year. The absence of load curtailment and a supportive (high) gold price means that the month-on-month decline in gold production was more of a surprise. That said, it does continue a trend observed over many years,” the council points out.
During the second quarter, the Minerals Council says, non-energy constraints seem to have outweighed the positive impact of improved electricity provision on mining production.
These constraints include a sustained depressed PGM price environment and ongoing logistical problems. In particular, it says, State-owned Transnet’s rail and port woes remain a major hindrance for the coal and iron-ore sectors.
As it stands, the Minerals Council says mining production is projected to decline quarter-on-quarter in the second quarter, subtracting from real GDP growth.
“However, based on the incoming high-frequency data from the non-mining sectors, we expect overall real GDP to more than recover in the second quarter from the 0.1% quarter-on-quarter contraction in the first quarter.” 