Nedbank: Mining production

12 Apr.

Nedbank Economic Commentary: Mining production.

Mining production plunged further in February, reversing the early signs of improvement evident in the fourth quarter of 2011.

• Total output fell by a seasonally adjusted 9,8% m-o-m following the revised 6,7% drop in January. On an annual basis output was down by 14,5% after contracting by a revised 4,9% (previously -2,5%) in January.
• Non-gold output fell by 14,8% y-o-y, with output of platinum group metals plunging by 47,6% compared with the same month a year ago. This reflected the impact of the strike at Impala Platinum’s Rustenburg Mine. Even though the platinum sector was the main drag on overall output, other key sectors were also weak, with gold production down by 11,5% y-o-y.
• Total mining production is likely to remain weak in the coming months, constrained by poor growth prospects globally and the slow domestic expansion.
• Mining sector output was weak at the start of the year and this is likely to be the case over the next few months. These numbers indicate that mining will probably make a negative contribution to the gdp numbers for the first quarter. However, this is unlikely to have much impact on the outlook for interest rates. The MPC’s focus will remain on the outlook for inflation and domestic demand. Inflation will remain elevated, but economic activity is expected to remain subdued. As a result, we expect the SARB’s MPC to leave interest rates unchanged at current levels until November 2012.

Comment

Mining production slumped further in February, confirming the sector’s weak start to the year. The weak trend in January and February reversed the improvement that had been observed since October 2011, when the sector was recovering from strike induced output fall during the year.

Total output fell by a seasonally adjusted 9,8% m-o-m following the revised 6,7% drop in January. Platinum output slumped by 32,5% m-o-m following the 17,2% drop in January, reflecting the impact of the six-week strike at Impala Platinum’s Rustenburg Mine. Gold output was down by 3,0%, while coal output fell by 2,0%, its second successive monthly decline.

On an annual basis total mining output was down by 14,5% after contracting by a revised 4,9% (previously -2,5%) in January. Non-gold output fell by 14,8% y-o-y, with output of platinum group metals plunging by 47,6% compared with the same month a year ago. Even though the platinum sector was the main drag on overall output, other key sectors were also weak, with gold production down by 11,5% y-o-y and coal output flat over the period. …

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