File image
Cape Town - Statistics released on Thursday  by Statistics SA indicated that the country’s mining production increased by 3.6% year on year in May after rising 1.6% year on year the previous month.

The surge in production was supported by a strong performance of the iron ore sector, while platinum group metals (PGMs) were a significant negative contributor in the period under review.

Mining ore production came in at 28.6% in May compared with 29.9% recorded in April; the iron ore mineral group comprises 14.9% of the mining production index.

On a seasonally adjusted basis, mining output edged down 0.2% in May, following a 1.4% decline in April.

The increase in iron ore production was attributed to the support to prices from China’s infrastructure and property construction spend, as well as lower iron ore supply growth.

The World Bank projected that industrial metal prices would increase by 16% this year due to strong demand and tightening markets for most metals.

Read also:  Downgrades to curtail prospects in mining industry 

Kamila Kaplan, an economist at Investec, said that the overall lift in commodity prices in conjunction with increased global growth momentum should continue to support mining production.

“However, this improved backdrop, relative to early 2016, has not resulted in a material increase in mining sector investment in production capacity or employment.

“High operating costs as well as continued regulatory and policy uncertainty remain a constraint on the performance of the sector,” Kaplan said.

Diamonds production surged 61% in the period compared with 12.1% in April. However, the production of PGMs shrank 17.5% in the period.

Macroeconomics statistics website Trading Economics said mining production in South Africa averaged -0.05% from 1981 until this year, reaching an all time high of 24.3% in October of 2013 and a record low of -18.4% in March last year.

Mineral sales increased by 11.2% year on year in April with the largest positive contributors coming from PGMs, which contributed 7.9 percentage points, while chromium ore contributed 3.5 percentage points and coal 3.1 percentage points.

Meanwhile, the South African Chamber of Commerce and Industry (Sacci) said yesterday restrained trade conditions persisted in South Africa last month as its Trade Activity Index (TAI) remained under the neutral 50-point market after it was registered at 48-point in the period.

This means the TAI was at the same level in June this year as it was at in the comparative period last year.

However, the seasonally adjusted TAI improved by a further two index points between June and May this year to 49. The seasonally adjusted TAI increased by 6 index points since April after the index reached a low of 43 in March.

Richard Downing, an economist at Sacci, said the recently announced recessionary conditions and junk status by reputable rating agencies were still affecting subdued trade conditions.

“Apart from the prevailing depressed economic conditions, respondents this month cited currency volatility, official red tape, instances of corruption, political uncertainty, lack of fixed investment and unpredictable economic policy as impediments to trade,” Downing said.

Sacci’s seasonally adjusted Trade Expectations Index (TEI) in June also remained in negative territory at 48, despite being recorded at 60 points during January and February.

Last year in the comparative period the trade expectations were positive at 54. The new orders index, however, declined to 46 points, while expected sales volumes slowed with the index declining by two index points to 52 in June.

Expectations for new orders also decreased to 47 from 49 in May, while the employment sub-index decreased to 47 in June - two index points lower than in May, but the employment outlook for the next six months improved as the employment expectations index increased by five index points to 46 in the last month.