Mining production contracted 5.2 percent year on year in July. Photo: Simphiwe Mbokazi/African News Agency (ANA)

JOHANNESBURG – Mining production contracted 5.2 percent year on year in July, the biggest drop since March, Statistics SA (StatsSA) said yesterday.

Uncertainty in South Africa’s policy and regulatory framework, depressed commodity prices, particularly platinum, and the looming global trade war have put a strain on the mining industry.

The decline in July output follows the 3.7 percent growth recorded in June and also falls below market consensus of a 2.9 percent gain.

StatsSA said that iron ore recorded a -17.4 percent and contributed -2.4 percentage points, and platinum group metals (PGMs) was -6.2 percent and contributed -1.3 percentage points.

Coal production was -5.8 percent and contributed -1.5 percentage points and gold output was -15 percent and contributed -2.4 percentage points.

On a monthly basis, mining output fell 8.6 percent, after rising 5.4 percent in the prior month. 

Mining production averaged -0.07 percent from 1981 until this year, reaching a high of 23.2 percent in October 2013 and low of -17.8 percent in March 2016, according to data website Trading Economics.

Investec said in a note yesterday that commodity prices had suffered of late as indicated by the Economist base metals index, which was down at about 16 percent from  January. “This has been exacerbated by a global climate of rising geopolitical tensions and heightened trade concerns which have reinforced investor concerns over global growth, threatening demand”.

FNB senior economic analyst Jason Muscat said he expected mining’s contribution to GDP to contract. “Year-to-date, mining output is down 1.1 percent, and given falling commodity prices, apart from oil, the mining sector is likely to detract from 2018 GDP.”

Muscat also said mining firms were grappling with problems. “The industry remains beset by a host of headwinds, chief among them the uncertainty surrounding the finalisation of the mining charter, the threat of higher US tariffs for Chinese imports, the potential impact it would have on global growth and demand, as well as rising input costs (because) of a far weaker rand”.

Nedbank Group economic unit said in a note that mining figures were volatile. “However, stronger global demand should offer some support for production and export volumes in 2018. The upside will probably be tempered by softer commodity prices and a generally difficult operating… environment.” 

– BUSINESS REPORT