Power Play: Eskom's load shedding takes toll on mining
JOHANNESBURG – Eskom's power outages hit the country’s mining industry as output fell for a third month in a row in October, throwing the sector’s contribution to the economy further into a tailspin.
Data from Statistics SA yesterday showed that mining production declined by 2.9 percent year-on-year during the period, weighed down by low productivity in diamonds, platinum group metals (PGMs) and manganese.
Principal survey statistician Juan-Pierre Terblanche said that October’s mining production was disappointing.
“Diamond production came off a high base in 2018 to record a 39.3 percent year-on-year decline in October.
"Diamonds, PGMs and manganese, which make up a sizeable 31.6 percent of the mining basket, detracted 4.3 percent from the top line reading.
“PGMs was the second-biggest negative contributor in October, falling by 4.8 percent,” Terblanche said.
“Manganese ore was the third-biggest burden on mining production, declining by 12.5 percent. Copper, chromium ore, coal and gold have also performed poorly in October.”
Chromium ore eased 2 percent, coal 1.5 percent, and gold 1.2 percent during the period.
Only iron ore and nickel rose 11 percent and 1.5 percent respectively.
The mining print was forecast to show a weak start to the fourth quarter after contracting 6.1 percent between July and September.
Investec economist Lara Hodes said that Eskom’s power woes had become an impediment to mining production.
“Recent heightened rotational load shedding has again forced many large miners to scale back production, which does not bode well for the fourth quarter headline outcome,” Hodes said.
“The unpredictability of electricity supply, along with constrained demand for industrial metals, underpinned by slowing global manufacturing activity continues to impede the mining industry, which is a key exporter.”
On Wednesday, Impala Platinum said that it lost R120 million (R1.77 billion) as a result of the closure of its Rustenburg and Marula mines during the different stages of load shedding.
Harmony Gold had to suspend underground operations for two nights at its nine mines in response to an urgent request from Eskom for power usage to be reduced to levels required only for the maintenance of essential services.
The SA Reserve Bank has cut its economic growth forecast by more than 60 percent for this year, from 1.5 percent to 0.5 percent, as productivity wanes.
On a more positive note, Bloomberg yesterday reported that palladium rose for a 15th day, heading for its longest run of gains on record and exceeding the highest-ever price of gold.
Spot palladium touched a record of $1 940.34 an ounce, extending its year-to-date gains to 54 percent after mines were shut down for up to 24 hours this week because of electricity shortages.
“It seems that nothing can slow palladium,” said Daniel Briesemann, a Commerzbank analyst. “Even though we regard the steep price rise as exaggerated, there is no end in sight to the rally.”
Palladium’s gains yesterday propelled and surpassed gold’s 2011 record of $1 921.17 an ounce.