South African mining has had a “poor start” to the year, leaving investors “cautious” on the outlook for the mining sector for the year after seeing production “slipping deeper” into negative growth territory in January.
Mining production contracted 4.5% year-on-year, from a downwardly revised 1.2% fall in December. Copper recorded the largest negative growth rate at -43.8%, followed by iron-ore at -26.3% and diamonds at -16.1%.
The main negative contributors to the 4.5% decrease were iron-ore, contributing a -5.8 percentage point decrease; copper, contributing -0.7 of a percentage point; and manganese ore, contributing -0.6 of a percentage point. Gold emerged as a significant positive contributor with 3.1 percentage points.
Despite “some relief rally” in risk and a pick-up in global commodity prices in recent weeks, “the broad trends of choppy, weak commodity prices and demand for the foreseeable future are likely to continue on the gradual unwinding of the Chinese investment boom,” said BNP Paribas Securities South Africa economist Jeffrey Schultz in an update to clients.
“This, coupled with the various structural constraints to domestic growth, weak confidence and rising input costs, such as electricity prices, will continue to place pressure on the mining sector through 2016,” he said.
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