THE record high gold price has not been able to stop the “deep structural decline” of South Africa’s gold sector according to Minerals Council chief economist Hugo Pienaar.
Reviewing the latest mining production and minerals sales statistics released by Stats SA for the second quarter of 2024 Pienaar said that manganese and chrome were the only sub-categories that had increased since the fourth quarter of 2019 – immediately prior to the COVID outbreak – until now.
In overall terms, real mining production in the second quarter was 8.7% lower than the fourth quarter of 2019.
Iron ore and gold had performed the worst and Pienaar commented, “this indicates that a record-high nominal gold price has not been able to arrest the deep structural decline in the domestic gold sector.
“To a large extent the weakness in iron ore and coal production is due to Transnet logistical problems, most notably a significant railway maintenance backlog.
“In the case of platinum group metals (pgms) production has been curtailed in response to a sustained low pgms basket price. The impact of this is also clearly illustrated in the latest mineral sales data. This indicated that the value of total mineral sales was down by 0,7% year-on-year in the first half of 2024 driven by a double-digit decline in the sales value of pgms.”
Pienaar commented that the second quarter mining production and mineral sales statistics show the mining sector is not yet benefitting substantially from the absence of load-curtailment.
He said, “the positive impact of much improved power provision is being diluted by other constraints, including rail and port constraints (mainly impacting coal and iron ore) as well as an adverse commodity price environment which is mainly impacting pgms. ”
Pienaar added, “with this in mind, overall mining production is likely to remain subdued in the foreseeable future. From an overall GDP (gross domestic product) perspective, a sustained weak mining sector performance is one reason to be somewhat circumspect on the extent of near-term growth lift amid the positive sentiment stemming from the formation of a government of national unity.
“That said, based on the incoming data for the non-mining sectors of the economy, we do expect a much improved – and positive – real GDP print for quarter two 2024. “
According to Stats SA total South African mining production showed a decline of 0.9% quarter-on-quarter in the second quarter of 2024 and this followed a contraction of 1.3% in the first quarter.
Pienaar commented, “the further decline in mining in the second quarter is particularly disappointing against a backdrop where mine load-curtailment was absent for the entire second quarter and electricity generation increased by just over 2% in real terms.”
