Nedbank Economic Commentary: Mining production – July 2011.
Mining production remains under pressure in July.
- Mining production was weak in July, partly reflecting the impact of labour strikes during that month.
- Total production contracted by 5,1% y-o-y after falling by a revised 0,1% (previously 0,7%) in June and was down by 4,3% m-o-m on a seasonally adjusted basis, the third consecutive monthly decline after drops of 0,4% and 6,6% were recorded in June and May, respectively.
- Non-gold and gold output were down by 5,4% y-o-y and 3,5% y-o-y respectively.
- Output of platinum-group metals slumped by 10,0% y-o-y following a period of strong increases since August 2010, while coal production plunged by 12,8% y-o-y.
- The short-term outlook for the mining sector remains dim. Global commodity prices could weaken as global growth slows; the risk of a sharp correction remains, particularly if the EU debt crisis intensifies and/or the US economy dips into another recession.The rand remains relatively firm despite its recent weakness and it is not likely to boost export competitiveness considerably, while logistical problems, particularly transport and energy capacity continue to hurt the sector.
- The effects of the labour strikes probably spilled over into August, which is likely to be another month of weak production. These factors indicate that the moderation in mining output could continue well into the second half of the year due to the high base established in 2010 and the loss in growth momentum internationally. Mining activity was very weak during the first half of this year, with production contracting by 4,0% qo- q and 4,2% q-o-q on a seasonally adjusted and annualised basis in the first and second quarters of this year, respectively.
- These numbers confirm that the production side of the economy remains weak; this against the backdrop of moderate consumer demand and increased risks on the global front. We therefore expect interest rates to remain unchanged until the second half of 2012.
Mining production remained weak in July, partly reflecting the impact of labour strikes during that month. This against the backdrop of a slowdown in mining activity as global demand lost momentum.
Gold and coal production – which together account for 42% of total output and were impacted by labour strikes during July – fell by 0,2% m-o-m and 10,7% m-o-m on a seasonally adjusted basis, respectively. Output of platinum group metals was down by 5,8% m-o-m, while coal output contracted by 10,7% m-o-m.
For the three months to July total mining production was down by 6,3% q-o-q, with gold production falling by 2,3% while non-gold production fell by 6,8%. Platinum-group metals production plunged by 15,6% q-o-q over the period, while coal production was down by 7,5%. Diamond production increased by 7,4% q-o-q. …
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