SA’s mining production decreased 9.6% year on year in February, driven primarily by a plunge in platinum group metals (PGM) output.
According to the latest Stats SA data, the country’s PGM production declined by nearly a quarter in the second month of the year after decreasing 3.8% year on year in January.
The PGM sector’s performance reflects an uncertain demand environment that has kept prices relatively depressed, said Minerals Council SA chief economist Hugo Pienaar.
US tariffs, including a 25% duty on all automotive imports, continue to spur fears that rising car prices will weigh on automotive demand for PGMs and “tariff uncertainty suggests that the major PGMs producers will be in no hurry to increase production in the near term”, said Pienaar.
The World Platinum Investment Council estimated that a 25% tariff on SA automotive exports may cut platinum and palladium demand by 70,000oz and 269,000oz, respectively.
Despite this uncertainty, the slower-than-expected market growth of electric vehicles has seen platinum, palladium and rhodium prices recording gradual gains from the start of the year.
“The current market narrative seems to be that outside China, electric vehicle penetration will be less aggressive than previously thought.
“This is providing some breathing space to PGMs that are used in traditional petrol and diesel-propelled vehicles,” said Pienaar.
Further pressure came from a 10.5% drop in iron ore output, as challenges with Transnet’s rail network continued to pose logistical constraints.
On a seasonally adjusted basis, February’s mining production was 4.4% lower than the previous month after a 4.2% month-on-month decline in December and a flat reading in January.
With SA’s mining output shrinking in the first two months of the year, the sector is likely to record a “notable quarterly decline” in the three months to end-March.
As a result, the mining industry will detract meaningfully from the country’s real GDP outcome in the first quarter, said the council.
“The poor start to the year for mining production, as well as the ongoing downgrades to the global real GDP growth outlook in an environment of significant uncertainty about tariffs and global trade, emphasises the need for a business friendly, lower-cost operating environment for mining in SA,” said Pienaar.
A report by the council earlier this month showed that electricity costs remain the biggest concern, with above-inflation tariff hikes being the primary driver of annual input cost growth in February.
Over the past two decades, the average electricity price for mining has surged 852%, said Minerals Council economist Andre Lourens.
“This trend will persist, with the National Energy Regulator of SA (Nersa) approving a 12.74% electricity tariff hike for direct Eskom customers (effective April 1 2025) and an 11.32% increase for municipal bulk purchases (effective July 1 2025) for the 2026 financial year,” he said.
As a result of the weaker production figures, SA’s mineral sales at current prices were down 12.9% year on year in February primarily driven by the iron ore sector.
Amid depressed iron ore prices, iron ore sales dropped by nearly 30%, cutting 4.9% from the headline sales figure.
Gold sales plunged 32.7% while sales of PGMs were down 12.2%.
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