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Mining output rises, but headwinds remain

 Johannesburg - Mining production rose 7.3% in January‚ marking the sector’s first month of year-on-year (y/y) increase since September‚ although Nedbank warns of a tough road ahead.

January’s increase follows a revised fall of 8.9% (y/y) in December (revised from a 7.5% fall).

Data released by on Thursday by Statistics South Africa showed that total mining production was 3.1% lower in 2012 compared with 2011.

January’s 7.3% (y/y) rise was the first increase since September 2012.

Mining output figures have been closely watched for indications of whether the sector was recovering from the widespread strikes of the third quarter last year.

“The road ahead still remains uncertain for the sector‚” Nedbank said.

“Locally‚ tough operating conditions still persist and globally commodity prices are not likely to make significant gains as demand conditions remain relatively unfavourable.

“The latest mining figures don't mask the fact that overall economic activity remains sluggish.”

Standard Bank is forecasting “lacklustre“ growth from the sector in the first quarter‚ though it expects conditions generally to improve.

On the costs front‚ it said the smaller tariff hike granted to Eskom would be a reprieve for industries including mining.

“”We are likely to see bouts of labour strikes in the mining sector this year but not at levels seen in 2012‚” the bank said in a release on Thursday.

“Significantly‚ there seems to be better communication between miners and unions. Towards the end of 2012‚ mining unions in the coal sector and the Chamber of Mines signed a new wage agreement. Such agreements should help avert future wage disagreements in coal mining.”

The bank also pointed to possible productivity improvements‚ saying: “Mining companies are also considering working more than the current 264 days a year‚ and closer to 365 days of the year. This should increase output and help with the normalisation of production.”

Stats SA said the highest positive growth rate in January was seen in diamonds‚ where output surged 55.8%‚ followed by building materials‚ up 35.3%; iron ore‚ up 33.4%‚ and manganese ore‚ up 20%.

Iron ore was the main contributor to the 7.3% increase‚ accounting for 4.8 percentage points of the rise‚ with diamonds and coal each contributing 1.1 percentage points.

On the down side‚ gold pulled the number down by 1.3 percentage points‚ with the “other metallic minerals” category the only other negative contributor‚ at 0.7 percentage points.

From December to January‚ seasonally adjusted mining production grew 5.5%‚ following a month-on-month fall of 0.1% in December and 12.7% in November.

Seasonally adjusted mining production increased by 5.4% in the three months ended January 2013 compared with the previous three months.

Mineral sales fell 3.3% year on year in December‚ with nickel experiencing the largest fall‚ at 21.2%‚ followed by gold’s 16.2% drop‚ a 13.1% fall in chromium ore sales and a 10% fall for platinum group metals.

Gold was also the biggest drag on December mineral sales‚ followed by platinum group metals and coal.

However‚ mineral sales rose 10% in December from November‚ after rising 2.5% in November and falling 4.2% in October. For the fourth quarter‚ mineral sales were 4.4% lower than in the third quarter. Again‚ gold was the main driver of this fall‚ followed by iron ore‚ while platinum group metal sales rose.

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