EDITORIAL: Anglo’s swift action sends encouraging signal

Anglo American’s share price has been pummelled over the past couple of days since it announced cuts to its output and capex plans in response to a hostile environment for its commodities.

It’s facing sharply lower prices for its platinum group metals (PGMs), with returns in the sector at 30-year lows. Diamonds are in the doldrums, too. But while Anglo remains bullish about the longer-term outlook for PGMs and diamonds, it’s being brutally realistic about the shorter term — hence the decision to slow down capex and implement added cost cuts.

But Anglo has been hit not just by the global downturn but also by SA’s own logistics crisis. Iron ore prices are strong, but Kumba Iron Ore can’t get its ore to market because of Transnet. Nor does Anglo expect an early end to Transnet’s troubles — hence the decision to cut production at Kumba.

In the previous commodity downturn miners were too slow to pull back on costs and capex, and the sector took plenty of pain. This time, the hope is that miners have learnt those lessons. In that sense Anglo’s swift action should be an encouraging signal even if it came as a shock to the market. For SA, however, the forced cuts at Kumba are another shocking reminder of the toll Transnet is taking on the economy.