Mining production with 5.2% IOL Company Report



JOHANNESBURG – Mining production rose by 5.2 percentage points in July, the biggest drop since March, Statistics SA (StatsSA) reported yesterday.

The uncertainty in the policy and regulatory framework of South Africa, the depressed commodity prices, especially platinum, and the impending global trade war have put the mining industry under pressure.

The decline in production in July follows the growth of 3.7 percent in June and also falls below the market consensus of a 2.9 percent profit.

StatsSA said that iron ore absorbed -17.4 percent and -2.4 percentage points contributed, and metals from the platinum group (PGM) was -6.2 percent and contributed -1.3 percentage points.

Coal production was -5.8 percent and contributed -1.5 percentage points and the gold output was -15 percent and contributed -2.4 percentage points.

On a monthly basis, mine production fell by 8.6 percent, after an increase of 5.4 percent in the previous month.

Mining production averaged -0.07 percent from 1981 to this year and peaked at 23.2 percent in October 2013 and -17.8 percent in March 2016, according to the Trading Economics data website.

Investec said yesterday in a note that commodity prices had suffered too late, as indicated by the economist Base metals Index, which dropped by about 16 percent from January. "This was exacerbated by a global climate of increasing geopolitical tensions and increased trade problems that have reinforced investor concerns about global growth, threatening demand".

FNB senior economic analyst Jason Muscat said he expected the mining contribution to contract to GDP. "Year-to-date, mining output is 1.1 percent lower and given the falling commodity prices, apart from oil, the mining sector is likely to reduce the GDP of 2018."

Muscat also said that mining companies struggled with problems. "Industry continues to suffer from a lot of headwinds, in particular the uncertainty surrounding the completion of the mining charter, the threat of higher US tariffs for imports from China, the potential impact it would have on global growth and demand, as well as the rising demand input costs (because) of a much weaker edge ".

The economic unit of the Nedbank Group said in a note that mining figures were volatile. "However, stronger global demand should provide some support for production and export volumes by 2018. The benefit is likely to be mitigated by softer commodity prices and a generally difficult operational environment."

– BUSINESS REPORT


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