Mining output contracts for eighth consecutive month

Mining production saw a steeper-than-expected contraction in June but rebounded in the second quarter of the year, which will boost GDP.

The sector has been hard hit by high input costs, particularly in the gold sector, waning global demand and subdued commodity prices.

Mining production decreased 4.2% year on year in June, after a contraction of 1.5% in May, data from Statistics SA showed on Thursday. This is the eighth consecutive contraction for the sector and a worse outcome than the 2.2% contraction economists polled by Bloomberg had expected.

Seasonally adjusted mining production increased by 3.2% in the second quarter of 2019 compared with a contraction in the first quarter when the sector was battered by load-shedding.

This bodes well for the GDP figure for the quarter, indicating that SA could avoid a recession.

The largest negative contributors in June compared to the year earlier were gold, down 16%; diamonds, down 33.2%; and platinum group metals (PGMs), down 6.3%.

Stats SA reports that its mining production index, which was set to 100 points in 2015, was 105.6 in June, up from 101 in May 2019 but down from 110.2 in June 2018.

The total sales of SA’s mining industry in June came to R47.82bn, a jump from R46.35bn in May and from R45.01bn in June 2018.

Stats SA showed that coal is SA’s biggest revenue earner, with sales of R11.63bn in June, followed closely by PGMs with total sales of R11.48bn, and iron ore at R6.17bn.

menons@businesslive.co.za