Mining costs hit 2025 high as power tariffs bite

JOHANNESBURG — Mining input costs in South Africa rose 2.5% year-on-year in September, the steepest increase this year, driven by surging prices for copper, iron, steel, and transport services, the Minerals Council South Africa said on Tuesday.

Intermediate mining and quarrying inputs led the uptick, while transport and storage costs climbed 4.6% annually amid higher road and rail freight charges. Electricity remained the largest cost burden, rising 15.5% year-on-year — exceeding the National Energy Regulator of South Africa’s (NERSA) approved 12.74% tariff hike for 2025/26.

“Electricity cost increases have consistently outpaced approved rates due to structural tariff adjustments,” said Minerals Council economist André Lourens, citing peak-time pricing and seasonal rates as key drivers. NERSA has launched an inquiry into fixed and legacy charges, with findings due in early 2026.

Partial relief came from lower financing costs (-8.7%), cheaper chemicals (-3.8%), and a 2.1% drop in petroleum product prices linked to global oversupply.

Platinum group metals (PGMs) and gold sectors faced the sharpest cost pressures, while iron ore and coal subsectors saw milder inflation.

Lourens flagged concerns over South Africa’s energy transition outlined in its 2025 Integrated Resource Plan, which targets slashing coal’s share of power generation from 58% to 11% by 2042.

While renewable energy costs have fallen, solar and wind remain pricier than coal (R546/MWh) and nuclear (R107/MWh) at R2,189/MWh.

“The mining sector’s competitiveness hinges on affordable electricity,” Lourens said, noting a 900% tariff surge since 2008 has shuttered smelters despite abundant mineral reserves. The plan’s infrastructure demands — including 14,000 km of new transmission lines — risk further cost escalation, he added.