Mining production plunged 28.2% year-on-year (y/y) in June, data released by Statistics South Africa showed. June’s output numbers follow an equally subdued May data which recorded a 27.6% decline in mining output in May.
June also marked the fourth consecutive month of downturn in mining activity as miners continued to face difficulties even after some lockdown restrictions were lifted. Platinum group metals saw production decline 42.5% y/y, while iron ore plunged 54.2% y/y and coal output decreased by 10.9%.
Geoff Nolting, Economist at FNB, said looking ahead, the sector will likely continue to face headwinds, particularly in attracting greenfield investment due to a number of factors, including declining global competitiveness.
“These factors increase the risk premium for investors on the back of a highly uncertain operating environment. Despite the challenging backdrop, there are some green shoots worth noting. We believe that the easing of lockdown restrictions by many of SA’s trade partners should bode well for PGM exports and prices (particularly palladium and rhodium) due to the commodity’s use in automotive catalytic converters and the resultant demand due to more stringent carbon emission regulations. In addition, gold producers will benefit from higher prices due to low global real rates as well as the commodity’s “safe haven” appeal among investors.
