Commodity Rout Hits Home as South Africa Has Record Output Dropby
Production fell 18% year-on-year, most since at least 1980
Platinum-group metals led decline with 24% drop, data show
South Africa’s mining production fell the most since at least 1980 after the country’s biggest gold and platinum mines halted unprofitable output.
Production declined 18 percent in March from a year earlier, accelerating February’s revised contraction of 8.3 percent, Statistics South Africa spokesman Juan-Pierre Terblanche said by phone Thursday. Expectations were for a drop of 12 percent, according to a Bloomberg survey of eight analysts.
“This is a radical structural shift for South Africa”, said Mike Schussler, chief economist at economists.co.za. “The commodities bust is coming home to roost. These are the worst numbers South Africa has ever had.”
The retreat was led by platinum-group metals, which plunged 24 percent, and coal, which was 16 percent lower. Producers of these commodities have been cutting output and spending in South Africa as they seek to remain in business amid plunging prices. Coal has fallen 56 percent since the beginning of 2011 while platinum is down 40 percent. About 30,000 jobs are at risk in the nation’s mining industry, the Solidarity labor union said last month.
Production of iron ore fell 21 percent, contributing 3.7 percentage points to March’s mining-output decline.
Safety stoppages have also hurt production at the country’s biggest precious metals miners including Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and AngloGold Ashanti Ltd. The nation is the world’s biggest platinum producer.
While mining makes up only 7.5 percent of South Africa’s economy, it represents about 40 percent of the country’s exports, affecting the current and trade accounts, Schussler said.
With 500 billion rand ($33 billion) spent on equipment and wages, mining has “a very strong multiplier effect” on the economy, he said.