Figure 1: Mining production annual growth
  • The rate of increase in mining production decelerated sharply to 0.1% y/y in December from 6.5% y/y in November. 
  • The largest negative contributions, of 2.0% and 1.3%, to the headline production outcome stemmed from 12.4% y/y and 5.5% declines in gold and coal production respectively. The effect was partially countered by a positive contribution, of 2.2%, derived from a 15.9% y/y increase in iron ore.
  • In the Q4.17 period, mining production contracted by 1.7% quarter on quarter seasonally adjusted. This measure provides guidance on the sector’s contribution to GDP and therefore suggests that mining detracted from GDP in Q4.17, following positive contributions in the prior three consecutive quarters. 
  • For the year as a whole, mining production increased by 4.0% y/y after contracting by 4.0% y/y in 2016. 
  • The improved performance in 2017 was mainly attributable to higher contributions from iron ore, manganese ore, diamonds and other non-metallic minerals (see figure 3). 
  • This will have been linked to the lift in industrial commodity prices. Specifically, the Bloomberg industrial metals index rose 19.5% and 28.1% in 2016 and 2017 respectively following double digit contractions in the prior three years (see figure 4). 
  • The broader increase in non-oil commodity prices has been supported by the solid expansion in global economic activity since the second half of 2016. There are increased signs of synchronisation across emerging and developed markets contributing to the upward revision of global growth forecasts by international authorities to the highest in seven years. 
  • Commodity price developments in 2018 and the domestic policy and legislative environment, will be important determinants of the performance of the mining sector in the year ahead. 
  • The perceived regulatory and policy uncertainty, linked amongst others to the revised Mining Charter, has contributed to the contraction in mining sector investment and the absence of meaningful job creation. The Chamber of Mines recently noted optimism regarding the “recent election of a new head of the ruling party, and a noticeable intent…to increase regulatory certainty in the mining sector.” In the meantime, the revised Mining Charter has been suspended ahead of a judicial review. 
  • In terms of commodity prices, the World Bank projects a further rise in metals prices in 2018. Downside risks include slower economic activity in China and a stronger USD, if the US Fed raises interest rates by more than market expectations.
Figure 2: Mining production volumes
Figure 3: Contributions to mining production growth
Figure 4: Bloomberg industrial metals price index