The mining data which was released by Statistics South Africa (StatsSA) on Thursday, shows mining production improved from the 0.3% contraction in September. This was helped by increases in iron ore and coal, while production of diamonds, gold and nickel contracted.
Iron ore was up 17.9% and contributed 4.2 percentage points to overall production growth. Coal production was up 6% and contributed 1.5 percentage points to overall production.
Mineral sales increased 7% in September, with the main positive contributors being manganese ore, up 176.2%. The contribution of manganese ore to sales growth was 5.1 percentage points. Gold sales were down 17.5% and sales for platinum group metals were down 10.1%, both were significant negative contributors, according to StatsSA.
In the first 10 months of the year mining production rose by 4% compared to a decline of 4.1% in the same period last year, said Investec economist Kamilla Kaplan.
“Growth in the mining sector has been aided by higher commodity prices, relative to decade lows reached in early 2016.
“The rise in commodity prices is linked to stronger industrial demand, mine supply constraints and to an extent, heightened geopolitical risks.”
Kaplan warned that the mining sector is likely to be affected by electricity tariff hikes, the National Energy Regulator of South Africa (Nersa) is expected to make a ruling on Eskom’s 19.9% tariff hike request next week.
“The sector is already contending with high operating costs and a tariff increase of this magnitude would have a significant impact,” said Kaplan.
“Overall, the global environment remains largely supportive of continued growth in the industry,” said Jason Muscat, FNB senior economic analyst.
“We expect positive full year output growth for the sector. The industry could gather even further momentum should the impasse over the new mining charter be resolved,” he explained.
The mining sector contributed positively to the third quarter GDP growth which was up 2%. The mining and quarrying sector increased by 6.6% and contributed 0.5 of a percentage point to GDP growth.