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Picture: 123RF/MARK AGNOR
Picture: 123RF/MARK AGNOR

Mining production beat estimates with an increase of nearly 10% year on year in February, partly underscoring the benefits of less disruptive stage 6 load-shedding during the month.

Stats SA figures issued on Thursday exceeded by far analysts’ forecasts of a 3.9% increase. The year-on-year figure also compares with a revised 2.8% drop in February.

On a month-on-month basis, seasonally adjusted mining production increased 5% in February, after contracting in January and December. The report from Stats SA showed that the largest contributors to the year-on-year increase in output were iron ore, coal and chrome.

The year-on-year growth in February was due partly to a weak performance in February 2023, when production fell 5%, said Hugo Pienaar, chief economist at the Minerals Council SA.

In later months any output growth would not be from such a low base. “The growth seen in February is positive, but it is unlikely that rate of growth will be maintained,” said Pienaar.

Investec Bank economist Lara Hodes said a 43% lift in iron ore output was largely responsible for the 10% lift in output in February. The demand for iron ore was supported by growth in global manufacturing, which, in turn, provided support for steel demand.

According to the latest JPMorgan global manufacturing purchasing managers’ index survey, March saw the rate of growth in global manufacturing production accelerate to its fastest pace since June 2022, which helped drive an increase in demand for industrial metals such as iron ore and chrome.

This was supported by positive movements in the seasonally adjusted global steel users’ purchasing managers’ index, which remained in expansionary territory in February for the second successive month.

Hodes said that though improvements were made in several areas, the mining sector continued to face challenges, including with water infrastructure and the poor state of roads and railways, which continued to impede optimal activity and export potential.

One of the challenges that remain for miners is poor rail performance as state-owned freight rail operator Transnet has struggled to recover from its faltering performance over the past few years.

Kumba Iron Ore, which produces more than half of SA’s iron ore output, announced earlier this year that it had, in response to rail challenges, revised its production guidance for the years 2024 to 2026 to between 35-million and 37-million tonnes a year, down from the previous figure of 42-million tonnes.

Coal miners have also indicated that they expect a modest, if any, recovery for coal exports via the Richards Bay Coal Terminal (RBCT), which has set a target of 50-million tonnes exported for 2024. In 2023, Transnet Freight Rail railed 47.9-million tonnes of thermal coal to the RBCT, compared with 50.33-million tonnes in 2022, a drop of 4.8% and the worst performance since the early 1990s.

Output from the manufacturing sector in February also performed better than expected.

Manufacturing production increased by 4.1% in February 2024 from a year earlier, according to Stats SA. This was above analysts’ expectations of a 3.7% lift. Positive contributions came from the wood, paper, publishing & printing, food & beverage, and petroleum & chemical products industries.

There was, however, a slight 0.3% decrease in output in February when compared with January’s performance. This was after a 0.4% increase recorded during January.

The latest industry numbers suggested that mining performance was less disrupted by stage 6 load-shedding during February than that of the manufacturing sector, said Jee-A van der Linde, senior economist at Oxford Economics.

April had thus far been free of load-shedding, but Van der Linde said his economic forecasts assumed that load-shedding would persist over the medium term, albeit less intensely, with fewer disruptions to general economic activity. “That said, it will still be a few quarters before we can expect to see meaningful improvement once conditions have stabilised.”

Van der Linde said manufacturing and mining’s contribution to GDP in the first quarter of 2024 would probably be mixed and insubstantial from a growth perspective. “Much will depend on the numbers for March.”

The Reserve Bank expects to see GDP growth of 1.2% this year. The economy performed worse than expected in the fourth quarter of last year, expanding only 0.1%.

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