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Mining production contracts for second consecutive month

Mining production contracts for second consecutive month

The Chamber of Mines said production in the industry contracted for a second consecutive month in March, raising more alarm bells about its health.

Production decreased by 1.4 percent between April and March, sparking some fears from the relevant stakeholders.

Reacting to the news, Chief Economist at the Chamber of Mines, Henk Langenhoven said: "This contraction is concerning as the 5 percent improvement in production over the first five months of 2017 is being eroded, resulting in annual production stagnating at 2016 levels (the latter having been 5 percent lower than 2015).”

Several factors have contributed to this contraction and the Chamber has done its best to explain what those factors are. 

 

"This decline is largely explained by a combination of the uncertainty regarding commodity prices and the strengthening of the rand: dollar exchange rate," said Langenhoven.

"The rand was, on average, nearly 17 percent stronger against the dollar during the first six months of 2017, compared to last year. It has strengthened by over 5 percent since January 2017.

"Although the average prices of the four important export commodities were higher (six months of 2017) compared with a year ago, January 2017 seemed to indicate a turning point, with production starting to falter shortly thereafter. The rand commodity price index declined by 12 percent since January. During this period, the rand landed-price for coal declined by 13.5 percent, iron ore by 32 percent, and while the gold price remained steady, platinum prices dropped by 9 percent.These commodities constitute 86 percent of exported minerals."

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