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The SA Daily 14 February 2019

December mining likely still down

Shireen Darmalingam

  • December mining production data is due out at 11h30; Bloomberg consensus is for output growth to have remained negative, at -4.3% y/y, from -5.6% y/y in November. In the first 11 months of 2018, mining production averaged -1.3% (4.0% in 2017; -3.8% in 2016). Over that time, the mining sector contributed negatively to overall GDP (0.1 pps), from a positive 0.3 pps in 2017 (see chart below).
  • The SA mining sector outlook remains bleak. Commodity prices are still constrained, and the SA terms of trade will likely trend sideways in 2019, which won’t bode well for jobs growth in this sector this year. However, the relatively pragmatic new Mining Charter should boost both mining output and jobs longer term.
  • Movements in the SA terms of trade (commodities prices, exports vs imports) are likely to be dictated by oil prices in 2019. We expect only a partial reversal of the recent dip in oil prices, which should boost the terms of trade whilst containing inflation (see 2019 SA macro outlook 11 January, by Elna Moolman).
  • Oil prices are up this week on OPEC supply cuts as well as US sanctions against Iran and Venezuela. OPEC cut output by 800,000 barrels per day (bpd) in January, to 30.81 million bpd. In addition, Saudi Arabia is cutting daily production and exports by a further 500,000 bpd.

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