Mining sector contraction to dent SA Q1 GDP amid plummeting PGMs and iron ore output, warns Minerals Council Economist

South Africa’s mining sector faces a challenging start to 2025, with real GDP growth expected to take a significant hit amid widespread production declines, according to Minerals Council Chief Economist Hugo Pienaar.

Recent data from Statistics South Africa reveals a steep 4.4% month-on-month contraction in seasonally adjusted mining output for February, with nine of twelve subsectors recording declines.

The platinum group metals (PGMs) and nickel sectors suffered particularly severe blows, plunging 18.8% and 24.6% respectively compared to January levels.

The annual comparison paints an equally concerning picture, with February 2025 production registering 9.6% below February 2023 levels, exacerbated by both current underperformance and elevated base effects from last year’s output.

Cumulative figures show mining production for the first two months of 2025 trailing 5.6% behind the same period in 2024, signaling sustained operational challenges.

While manganese, copper and nickel operations show resilience, these bright spots are overshadowed by struggles in the heavyweight iron ore and PGMs segments that dominate South Africa’s mineral economy.

PGM producers continue navigating turbulent market conditions characterized by depressed global demand and pricing pressures, despite rand-denominated price improvements for platinum (+12%), palladium (+8%), and rhodium (+5%) year-to-date.

The sector finds temporary relief in moderated expectations for electric vehicle adoption in Western markets, which preserves demand for catalytic converter metals.

However, looming US tariff uncertainties and associated risks to vehicle pricing are causing major producers to maintain cautious production strategies.

Parallel challenges plague the iron ore sector, where chronic logistical constraints around rail and port infrastructure persistently hamper output.

These operational hurdles compound the negative effects of softer global demand in key markets.

With March production data still pending, preliminary figures suggest mining will substantially detract from Q1 2025 GDP growth, potentially exacerbating South Africa’s broader economic challenges.

Pienaar emphasises that this poor sectoral performance coincides with deteriorating global growth forecasts and escalating trade policy uncertainties, underscoring the urgent need for domestic policy reforms.

“The convergence of operational constraints and external market pressures highlights the critical importance of cultivating a competitive, cost-effective operating environment for South Africa mining industry,” the Chief Economist noted, calling for accelerated regulatory reforms and infrastructure investments to safeguard the sector’s vital economic contribution.