South Africa’s Mining Output Contracts As Operational Woes And Market Swings Weigh On Sector

The minerals and metals that contributed to the weak performance of the sector account for 70.6% of the mining sector’s production basket.

Precarious post-July recovery

The contraction underscores the mining sector’s fragility, as it remains highly sensitive to both commodity price shifts and operational challenges, revealing a precarious post-July recovery.

This dip came despite relatively stable input costs for the period, suggesting that production challenges were more closely tied to market and operating dynamics than cost pressures.

Production increases were recorded in copper (+24.7%), nickel (+13.8%), and coal (2.7%).

These gains were not enough to offset the broader decline. The three commodities account for 23.6% of the total mining production basket.

On a year-on-year (y-o-y) basis, total mining production contracted by 0.2%1 in August. The decline was largely driven by weaker performance in PGMs (-21.7%).

Gold production also fell by 3.6% y-o-y, marking its second consecutive monthly drop, as producers grappled with industry-specific rise in operational costs and regulatory pressures.

This was despite prices increasing by 36.4% in August to average $3,387/oz. Manganese ore (-3.4%), nickel (-21.7%), copper (-19.7%), and chromium ore (-1.6%) contributed further to the downturn, reflecting broader challenges in the sector.

Interestingly, the decrease occurred despite historically low input costs.

Mining cost inflation (including labour) increased by 1.3% in August.

On the upside, iron ore (+2.2%), diamonds (+29.5%), and coal (+4.1%) posted gains, with coal alone adding 0.8% to overall output performance.

Ongoing vulnerability

The mixed results highlight the mining sector’s ongoing vulnerability — driven by commodity-specific trends and global instability — which continues to threaten recovery.

And while input costs remain low on average, electricity, water, and labour costs continue to exert pressure on the sector.

Staying with chromium ore production in South Africa, the spectre of an export tax continues to loom large over the industry, raising concerns about competitiveness and profitability.

Media reports suggest the tax on chrome ore exports could be as high as 25%.

Producers warn that such a levy could significantly reduce export volumes, particularly to key markets like China, and potentially lead to job losses at chrome mines.

The government believes the proposed tax, aimed at stimulating local beneficiation and the restart of idled ferrochrome plants, if implemented, could reshape the economics of South Africa’s chrome industry by encouraging companies to reassess investment plans and operational strategies.

However, ferrochrome smelters have been idled because of the rapid escalation of electricity tariffs and variable supply issues in the past two decades, rather than the availability and price of chrome concentrate.

While Eskom’s performance has significantly improved, electricity generation in 2024 remained 6% below 2019 levels — approximately 14 terawatt hours (TWh) less than the pre-Covid benchmark.

More strikingly, generation in 2024 was still 27.7 TWh lower than in 2007, reflecting an 11.5% decline over the longer term.

But the drop in volumes has been offset by significant increases in electricity tariffs.

Since 2007 (to 2024), electricity tariffs have, on average, increased by 937% compared to 155% for consumer price inflation over the same period.

Electricity costs

The Minerals Council South Africa said it is clear that electricity costs remain the single biggest constraint to ferrochrome beneficiation in South Africa, undermining the industry’s competitiveness and growth potential.

In 2024, the average ferrochrome production cost per tonne was approximately $119 in South Africa compared to $103 in China.

Contrary to the view that a chromium ore export tax will enhance ferrochrome smelting competitiveness, South Africa already benefits from significantly lower feedstock and transport costs compared to China.

The MCSA warns that such a tax would fail to resolve the underlying challenges facing the ferrochrome sector and could instead cause harm to the chrome mining and ferrochrome sectors.

Overall, the council expects quarter-on-quarter production performance of the sector to increase by approximately 1.5% in the third quarter of 2025.

Year-to-date (January to August) mining production declined by 1.5% in 2025 compared to the same period in 2024.

Total minerals sales for August increased marginally from R73.5bn (July) to R73.6bn. Year-to-date (January to August) total mineral sales increased to R534bn compared to R527bn in the same period in 2024.

Sales earnings continue to trend significantly lower compared to the two years post-Covid-19. The sector is under pressure vis-à-vis its operating expenditure.

Amplifying uncertainty

South Africa’s mining production data for August 2025 reflects a modest but notable slowdown, with a 1.2% month-on-month and 0.2% year-on-year decline.

The prospect of a chrome ore export tax raises broader concerns that similar measures may be extended to other key commodities, amplifying uncertainty across the mining sector.

Without adequate and affordable power, mineral beneficiation does not present a viable business case in South Africa.

While South Africa possesses a comparative advantage in mineral endowment, this does not automatically translate into a competitive advantage — an outcome largely shaped by government policy.

It is the government that enacts investment-friendly policies and is responsible for creating an enabling environment.

The MCSA says that “developing efficient, affordable, world-class infrastructure is also central to converting comparative advantage into competitive strength. The latter is not innate — it must be created.”