Mining production increased by 1.1% year-on-year in June 2023, led by a 28% increase in gold production and a 11.1% increase in the platinum group metals (PGM), data from Statistics South Africa showed yesterday.
But, said FNB senior economist Thanda Sithole, despite sustained quarterly growth momentum, the mining sector remains challenged by load-shedding and logistics constraints, as well as moderating external demand.
The largest negative contributors to overall monthly mining production were iron ore, where production fell -18% and diamonds, which was down -41%, which contributed to a -2.4 and -1.8 percentage point decline respectively in the overall production data.
Seasonally adjusted mining production increased by 1.3% in June 2023 compared with May 2023. This followed month-on-month changes of -3,8% in May 2023 and 1.6% in April 2023.
Investec economist Lara Hodes said in a note the sluggish greenback combined with geo-political tensions had supported the gold price, while PGM’s had benefited from robust global auto sales in the first half of 2023.
She said conversely, the fragile global economic environment with slower-than-projected demand from China had weighed on diamond sales, while competition from the lab-grown diamond industry persists.
In addition, the under performing global manufacturing sector had led to reduced demand for base metals, said Hodes.
For the second quarter of 2023 compared with the first quarter, seasonally adjusted mining production increased 1.5%.
The largest positive contributors were PGMs (5.8% and contributing 1.3 percentage points); gold (5.2% and contributing 0.8 of a percentage point); ‘other’ metallic minerals (19.9% and contributing 0.4 of a percentage point); and coal (1.5% and contributing 0.4 of a percentage point).
Mineral sales at current prices decreased by 14.3% year-on-year in June 2023. The largest negative contributors were PGMs (-30.9%); coal (-26.2%); ‘other’ non-metallic minerals (-47.8%); and iron ore (-15.5%).
Gold (84.8%) and chromium ore (57%) were significant positive contributors.
In the second quarter of 2023 the seasonally adjusted value of mineral sales at current prices was 3.8% lower compared with the first quarter of 2023.
Sithole said in a note: “Commodity prices have come down relative to last year, weighing on earnings and the mining sector’s contribution to government tax revenue collection. Output is down by 1.% in the first half of 2023 compared to the first half of 2022. This is consistent with our expectation of a continued, albeit moderate, decline of around 2.0% (relative to a 7.1% decline in 2022) in the mining sector’s gross value added.”
He said year-to-date gold output is up 18.4% year-on-year reflecting a rebound from the 20% decline recorded over the corresponding period last year. Iron ore production declined sharply by 18.0% after declining by 6.1% in May.
BUSINESS REPORT