BMI View: South Africa's mining sector will face persistent headwinds due to labour unrest, mineral price weaknes s, further divestments and retrenchment.
|e/f = BMI estimate/forecast. Source: BMI calculation, UN Data|
|Mining Industry Value, USDbn||32.78||26.73||26.51||26.25||26.64||26.66|
|Mining Industry Value, USDbn, % y-o-y||0.40||-18.45||-0.82||-0.97||1.49||0.05|
Latest Updates And Structural Trends
Coal: As Anglo American is keen to offload the majority of its South-African assets, this could result in a significant decline in the country's coal production growth. As such, we revised down our 2016 and 2017 coal production forecast from 1.3% to -4.0% and 1.0% to -1.5%, respectively. Despite this, South Africa, which is Sub-Saharan Africa (SSA)'s largest coal producer, with a 94.6% share of regional coal production in 2015, will remain the region's largest coal producer. We forecast South Africa's coal production to grow from 252million tonnes (mnt) in 2016 to 264mnt in 2020. This would represent average annual growth of 0.1% during 2016-2020, slightly higher than the average 0.9% decline during 2010-2014.
Gold: Although the DRC, Zambia and Mozambique will be the region's growth bright spots, South Africa will remain SSA's largest mining country in terms of MIV. For instance, South Africa's MIV will total USD26.7bn in 2016, whereas DRC, Zambia and Mozambique's MIV will total just USD4.3bn, USD1.3bn and USD0.7bn, respectively. However, South Africa's mining sector will continue to face a myriad of challenges from a combination of low mineral prices, elevated production costs and growing regulatory risks. Both low gold prices and ongoing wage negotiations will continue to hurt the sector's growth output. Beyond 2016, we forecast output to average annual growth of 0.2% during 2016-2020, with output totalling 4.53moz by 2020.
Iron Ore: We have revised up our iron ore forecasts to 2020. We expect iron ore prices to average USD48.0/tonne during 2016 and USD43.0/tonne in 2017, up from our previous forecasts of USD38.0/tonne and USD40.0/tonne, respectively ( see: 'Iron Ore: Chinese Stimulus Only Short-Term Boost To Prices', May 5). Our upwards revision is predicated on the strong H116 iron ore price rally due to increasing demand from Chinese steel mills. As stated above, we expect prices to fall in the latter half of 2016 as Chinese ore demand will weaken due to declining demand from steel producers ( see: 'Renewed China Weakness Will Limit Price Gains', April 26). We expect prices to head lower in 2017 as the H116 rally will result in high-cost iron ore producers coming offline at a slower pace than we initially expected. In addition, the global iron ore market is going to continue to see strong supply from low-cost producing countries Australia and Brazil, the world's second and third largest producers, respectively, which will partially offset the slowdown in Chinese iron ore production.
The country's Iron ore exports to China will slow on the back of the country's slowdown in steel production over the coming quarters. In the first four months of 2016, ore exports to China fell by 3.0% y-o-y, following 6.2% growth in 2015.
Platinum: South Africa's platinum production will decline from 3.8moz in 2016 to 3.5moz in 2020. This would represent an average annual contraction of 2.7% during 2016-2020, following an average annual decline of 4.8% during 2011-2015. Previously, in 2015, South Africa's platinum output grew by 4.0% on the back of a stronger-than-expected recovery in production of the sector's top three producers, namely Lonmin, Anglo American Platinum (Amplats) and Impala Platinium. The strong recovery this is primarily due to production recovering following a 16.0% decline in 2014, resulting from a five-month strike at Lonmin's Marikana mine.
Palladium: Production growth will slow significantly on the back of low prices, rising operational costs, increasing government intervention and continued labour unrest. We forecast South Africa's palladium output to grow marginally from 2.37moz in 2016 to 2.45moz in 2020. This would represent an average annual growth of 0.9% during 2016-2020.
The South Africa Mining Report has been researched at source and features BMI Research's mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.
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BMI Industry View
Summary of BMI’s key forecasts and industry analysis, covering mining reserves, supply, demand and prices, plus analysis of landmark company developments and key changes in the regulatory environment.
Industry SWOT analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the mining sector and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:
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