Mining output shows slight improvement but declines year on year
JOHANNESBURG – Mining output declined 29.8 percent year on year in May, but there was a slight improvement from the record low of -50.3 percent in April, as most mining activities were curtailed due to level 4 of the national lockdown regulations, Statistics SA (StatsSA) reported yesterday.
StatsSA said that year-on-year output from iron ore mines in May fell by 66.3 percent shaving off -7.4 percentage points.
Platinum Group Metals (PGM) mines produced 27.3 percent less ore during the period under review, and contributing -6.6 percentage points, while output from manganese ore mines fell by 45.5 percent and contributing -3 percentage points. Non-metallic minerals declined 46.7 percent and contributed -2.8 percentage points, while coal production fell by 9.6 percent, shaving off -2.6 percentage points.
On a seasonally adjusted basis, mining output jumped by 44 percent month on month in May.
However, seasonally adjusted mining production decreased by 31.3 percent in the three months ending May, compared with the previous three months, with the largest contributors being PGMs, iron ore, gold and non-metallic minerals.
StatsSA said mineral sales decreased 13.4 percent year on year in May. However, gold mines were a significant positive contributor, having increased production by 58.6 percent and contributing 5.7 percentage points.
This was because gold had sparkled due to uncertainty amid the economic fallout due to the Covid-19 pandemic, resulting in a surge of the gold price as investors flocked to the safe haven.
Geoff Nölting, an economist at FNB Wealth and Investments, said the transition from level 5 to level 4 of the lockdown, coupled with lower global demand for commodities, had resulted in the decrease in domestic mining production.
“This is the third consecutive annual decline in mining output, following downwardly revised contractions of 50.3 percent year-on-year, previously 47.3 percent in April and 19.1 percent in March, previously 18 percent,” Nölting said, adding that he anticipated that last month's mining production print would improve relative as most mining activities were permitted to scale up toward operating at full capacity under level 3 lockdown regulations.
“However, miners will still have to contend with several headwinds, including containing potential Covid-19 outbreaks, lower capacity utilisation rates due to suboptimal operating conditions, load shedding as well as weak external demand from many of our trading partners,” said Nölting.