Mining production levels normalising, says Nedbank
With most of the base effects having dissipated, mining production levels seemingly normalised in August, the Nedbank Group Economic Unit notes.
Statistics South Africa on October 12 reported that mining production had increased by 2% year-on-year in August, with the biggest contributors being gold, iron-ore and platinum group metals (PGMs), contributing two, 1.9 and one percentage points, respectively, to the headline figure.
Chrome and diamonds also made positive contributions.
Coal production, however, decreased by 8.5%, shaving off a considerable 2.2 percentage points and limiting the overall growth in mining sector activity, Nedbank notes.
It says that, worryingly, mining production in August was down by 4.3% and 1.1% compared with the August 2017 to 2019 average and August 2019, respectively.
“Most minerals are in negative territory, except PGMs, chrome and diamonds, which are at higher levels by both measures. Even though copper production has a small weighting, the commodity is a massive 58% lower than its 2017 to 2019 average,” Nedbank points out.
Mineral sales, meanwhile, remained robust, buoyed by global demand and elevated commodity prices.
Sales advanced by 35.1% in August from 35% a month earlier. The main contributor was PGMs, up 55.1% and adding considerable 18.9 percentage points to the total.
Gold, coal and iron-ore sales also made significant positive contributions.
Over the month, sales rebounded by 11.5% from the 10.5% decline in July, helped by the normalisation of operations at major ports following the unprecedented disruptions in July, Nedbank notes.
Overall sales are 61.6% and 74.2% higher than its 2019 level and three-year average, respectively. PGMs, iron-ore, coal and chrome have been the top performers. Gold sales are also in the green.
“The mining sector’s output levels seem to be normalising, while sales continue to shoot through the roof. While sales will probably be supported by increased global demand and still high commodity prices, we think most prices will begin levelling off into 2022.
“Overall, economic conditions remain conducive to continued expansion in mining sector activity over the remainder of the year.
“However, downside risks remain significant. The Delta variant’s continued prevalence and the associated lockdowns, global supply disruptions and the return of load-shedding will inhibit a faster pace of output activity,” Nedbank says.
Source: Mining Weekly