SA mining buoyed by rising output in gold, iron ore
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MINING production in South Africa continued to grow albeit at a slow pace in August buoyed by rising output in gold and iron ore due to rising demand of the commodities.
Statistics South Africa (StatsSA) yesterday said mining production rose by 2 percent in August from a year earlier following an upwardly revised 12.3 percent jump in July.
This was the sixth consecutive month of increases in mining activity, although at the weakest pace, boosted by high commodity prices and rising global demand.
StatsSA said the largest positive contributors were gold production, which rose 17 percent, iron ore and platinum group metals.
However, coal production was a drag on the overall print as it fell by 8.5 percent.
On a seasonally adjusted monthly basis, StatsSA said mining production shrank 2.4 percent, the most since May, following a downwardly revised 3.2 percent rise in July.
Despite this contraction, economists believe the higher output level in July still implied that the mining sector likely contributed positively to the third quarter real gross domestic production (GDP) growth.
Investec economist Lara Hodes, however, said the robust rebound in global demand driving a significant increase in commodity prices had started to ease.
Hodes said further waves of infection and lockdowns also remained a downside risk to the global growth outcome, and accordingly South Africa’s growth trajectory, which was significantly influenced by the export of commodities.
“The country's myriad challenges continue to weigh on its ability to attract foreign direct investment.
“Electricity supply constraints continue to hinder optimal activity within the energy intensive mining sector, with rotational load shedding a persistent feature.”
In the three months to August, output was 0.4 percent compared with the previous three months, with manganese and iron ore being the main contributors.
StatsSA said year-to-date, mining output posted growth of 16.9 percent compared with the corresponding period last year, and 1 percent compared with the same time in 2019.
Sales advanced by 35.1 percent in August from 35 percent a month earlier, with the PGMs being the main contributor.
Gold, coal and iron-ore sales also made significant positive contributions.
At about R574 billion year-to-date, the value of mining exports was 70 percent higher in August than the corresponding period in 2020.
FNB senior economist Thanda Sithole said this corroborated their view that the mining sector should support the modest cyclical gross domestic product growth rebound this year.
Sithole said despite the recent relapse in some commodity prices, mainly PGMs, the sector had benefited from a global rebound and elevated prices.
“We maintain our view that electricity-related disruptions, along with elevated input costs, could limit the extent to which mining volumes benefit from the global growth rebound,” Sithole said.
“Inefficiencies at the ports are also not encouraging for general export volumes of mining, manufacturing and agriculture.
“Medium-to-long-term growth in the mining sector will depend on exploration expenditure and the country’s ability to create a conducive environment to attract new fixed investments.”