Mining production increased by 21.3% year-on-year in March, data published by Statistics South Africa shows.
The largest positive contributors were platinum group metals (PGMs), with a 68.6% increase and contributing 11.6 percentage points; iron-ore, with a 47.9% increase and contributing 4.1 percentage points; manganese ore, with a 29.9% increase and contributing 2.4 percentage points; and gold, with a 10.5% increase and contributing 1.5 percentage points.
Further, seasonally adjusted mining production increased by 4.5% month-on-month in March.
This followed month-on-month changes of 0.9% in February and 4.2% in January.
Seasonally adjusted mining production increased by 3.8% in the first quarter of the year compared with the fourth quarter of 2020.
The largest positive contributors were PGMs, with a 21.5% increase and contributing 4.3 percentage points; and iron-ore, with a 17% increase and contributing 1.7 percentage points.
Nedbank Group’s Economic Unit comments that, except for coal and diamonds, all other categories recorded solid double-digit growth year-on-year.
Copper production, which increased by 63.4%, grew for the first time in seven months, driven by higher demand for the metal.
Gold output also turned the corner, increasing by 10.5%, after 11 months of contraction, it notes.
By contrast, diamond production edged lower for the first time in nine months. Lower coal production, which has essentially been declining since the pandemic struck in March 2020, is most likely owing to India's weaker demand owing to the slowdown in activity, also reflected by the fluctuations in the oil price, Nedbank says.
Mineral sales increased by 46.9% year-on-year in March.
The largest contributors were PGMs, with a 76% increase and contributing 26.1 percentage points; gold, with a 61.3% increase and contributing 7.2 percentage points; iron-ore, with a 48.3% increase and contributing 6.9 percentage points; and ‘other’ non-metallic minerals, with a 72% increase and contributing 2.2 percentage points.
Seasonally adjusted mineral sales at current prices increased by 15.7% in March compared with February.
This followed month-on-month changes of -9.5% in February and 31.9% in January.
In the first quarter of this year, the seasonally adjusted value of mineral sales at current prices was 22.3% higher compared with the fourth quarter of 2020.
Financial services provider FNB economist Thanda Sithole says the out-turn for overall mining production growth was materially above the Bloomberg consensus prediction for growth of 9.4% year-on-year.
“Sustained higher commodity prices and rising external demand remain supportive of mining activity.
“However, the more robust growth in mining output could largely be attributed to reduced output levels from last year’s supply chain disruptions and lockdown restrictions (that is, the lower base effect in 2020). Due to this phenomenon, mining output will undoubtedly post more robust year-on-year growth rates in April and May,” Sithole says.
He highlights that, encouragingly, the seasonally adjusted mining output, which aligns with the official calculation of quarterly real gross domestic product (GDP) growth, grew by 4.5% month-on-month in March following downwardly revised growth of 0.9% month-on-month in February.
Sithole notes that, overall, seasonally adjusted mining output grew by 3.9% in the first quarter after contracting by 1.6% in the fourth quarter of 2020 – therefore, this means that the mining sector meaningfully supported overall real GDP growth in the period.
FNB’s near-term outlook for the mining sector remains intact, Sithole says.
The bank expects mining activity to be supported by the sustained higher commodity prices from last year and the anticipated robust economic growth rebound, mainly from South Africa’s major trading partners.
However, near-term potential risks include the slow roll-out of vaccines (versus the imminent third wave of infections) and the unresolved electricity supply challenges, which could limit production even as the global economy recovers.
Over the medium to long term, domestic mining activity might be supported by the likelihood of more infrastructure investment in the US, the eurozone and other regions, notes Sithole.
Despite the statistical base effects, the rebound in the global economy and boost to commodity prices have strongly supported South Africa's mining sector, Nedbank says.
“Year-to-date, the sector is up 3.1%, which will be a welcomed positive for first-quarter GDP.
“Looking ahead, the sector faces counter-balancing factors. On the international front, improving industrial activity and firmer commodity prices will support higher production.
“Domestically, however, an uncertain legislative framework and unreliable power supply pose imminent downside risks. Furthermore, new waves of Covid-19 infections and the associated restrictions on economic activity remain a threat to the pace of recovery,” Nedbank comments.