Mining update: Mining production lifted by 2.4%y/y in January, on the back of a strong contribution from iron ore
14 Mar 2018
- Mining production gained some momentum in January 2018, increasing by 2.4% y/y, after dropping by 0.5% y/y (revised downwards from 0.1% y/y) in December (see figure 2). This was above consensus expectations of 1.3% y/y.
- Lower statistical base factors in January 2017 account for some of the forecast lift, but the effects on the local industry of increased global activity and higher commodity prices are also key influencing factors. The Economist base metals index has been trading at levels last seen five years ago (see figure 3).
- In January, production growth in the iron ore and ‘other’ non-metallic minerals yielded the largest positive contributions to the headline outcome, of 3.4% and 1.3% respectively. The largest negative contributions, of a combined 4.0%, stemmed from PGMs and gold (see figure 1).
- Difficult operating conditions and expected mine closures, will have a drag on production numbers in the future, as will the strong rand.
- Finally, policy and regulatory uncertainty, specifically around the redrafted mining charter, have affected much needed investment into the sector, but a turnaround is now hoped for under the new Minister of Mineral Resources Gwede Mantashe.
- President Ramaphosa recently told Parliament that “(T)he mining charter is being addressed ::.. (T)he agreement reached should be to the benefit of the industry as a whole and all its stakeholders.” It is key government and the private sector in the mining industry establish a good working relationship as soon as possible, to be able to take advantage of the global economic upswing and rising commodity prices in order to be able to create much needed jobs and higher business activity.