After three consecutive months of growth, SA’s mineral output took a turn for the worse in November, decreasing 0.9% year on year, driven mainly by the gold sector.
Production of the precious metal fell 11.5% year on year in November, the steepest decline since June and the 13th straight month of declines after 3.4% drop in October.
The local mining sector also produced less iron ore, coal and diamonds in November, with output falling by 3.8%, 1.6% and 11.4%, respectively.
However, those decreases were offset by the platinum group metals (PGMs) sector, where production rose 4% year on year, adding 1.3% to the mining sector’s overall output.
Further support came from chromium ore, with output increasing by 15.6% year on year. The chromium sector’s contribution, while less significant than that of PGMs given its smaller size in SA, added another 0.7% to November’s reading.
On a monthly basis, mining production declined by 0.2% after monthly decline of 2.8% in October.
The Minerals Council SA was optimistic that “even though we’ve seen two consecutive monthly declines in mining production, the fourth quarter is still likely to see a positive contribution to overall GDP”.
“Because the industry ended the third quarter on a relatively high level, we are still likely to see a quarter on quarter increase in fourth quarter production overall,” it said, highlighting the mining sector’s strong performance in the first 11 months of last year, when real mining production rose by 0.6% compared to the same period in 2022.
“This is important because it follows two years where in 2022 we saw a very sharp contraction of around 7% in mining production, followed by a flat reading in 2023,” the council said.
As a result, “2024 is now set to be the first year since 2021 where we have positive mining production in a calendar year”.
Seasonally adjusted mining production for the three months to end-November was up 4% from the previous three months. The largest contributions came from PGMs, (up 7.2%), iron ore (9.4%) and coal (2.7%).
Additionally, SA’s mineral sales increased 8.1% year on year in November with gold emerging as the primary driver. In contrast to its declining output, gold sales increased 93.4% year on year, as producers continued to benefit from the metal’s ongoing price rally.
The mining sector’s improved sales volumes were further supported by the coal sector, with sales increasing 8.5% year on year, while PGM sales increased 4.3%.
Sales of iron ore, however, decreased 28.2%, making the iron sector the largest negative contributor to November’s overall mineral sales.
Investec economist Lara Hodes said subdued manufacturing conditions in a number of key countries continue to weigh on the demand for industrial commodities, putting pressure on the price of iron ore, the main input for steel production.
While mining input costs reached their lowest level for 2024 in October and November, the Minerals Council warned that persistent cost pressures continue to constrain the mining sector’s ability to contribute to SA’s real GDP outcome.
Electricity remains a key driver of input cost inflation, with the National Energy Regulator’s double-digit tariff hike for the 2024/25 financial year leading to a 12.2% increase in the cost of power in November.
Expenses for mining chemicals, prepared explosives and chemical catalysts also continued to climb in November, increasing 8.2% year on year, while wholesale and retail trade prices rose 1.4%.
Rising rail costs have added to the recent pressure on mining profitability as Mozambique’s ongoing civil unrest saw operations at the Lebombo port of entry — critical to SA’s coal and chrome exports to Maputo — suspended several times late last year.
On a monthly basis, November’s cost inflation was primarily driven by higher transport and storage costs, which rose by 1.5% month on month despite road and rail payloads remaining mostly unchanged.
Update: January 21 2025
This story includes additional information and economists’ comment
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