Mining input costs hold steady amid inflation pressures

Mining sector in South Africa input costs remain subdued in April and May, with the Minerals Council Composite Input (MCI) Cost Index rising just 1.1% year-on-year, inclusive of labour expenses.

Minerals Council Economist André Lourens attributed the trend to broader inflationary moderation, noting that “mining input cost pressures align with South Africa’s general inflation trajectory.”

Excluding labour, the index fell 0.7% year-on-year, reflecting deflationary conditions driven by cheaper crude oil, hitting a 2025 low of $64.10/barrel, lower interest rates, and a stronger exchange rate against trading partners.

Lourens highlighted structural improvements in cost measurement, citing a revised methodology in the MCI third major update since 2018.

The May decline was bolstered by a 3.4% monthly exchange rate gain, reducing import costs, alongside a 2.4% drop in mining input expenses and a 2.3% financing cost dip following the South African Reserve Bank May rate cut.

However, electricity tariffs rose 1.5% monthly, with further hikes expected under winter pricing. NERSA 12.74% Eskom tariff increase, effective April 2025, continues to drive double-digit electricity inflation.

Labour costs remain pivotal, with R49 billion paid to workers in Q1 2025, while water expenses—newly added to the index—climbed 4.6% annually.

The platinum group metals (PGM) sector recorded the steepest input inflation, outpacing gold for the first time this year, while manganese and coal saw the mildest pressures.

Lourens emphasised the index’s enhanced accuracy, now featuring an aggregate measure reweighted with 2024 data and rebased to December 2023.

“This overhaul aligns the MCI with current sector dynamics, offering a sharper tool for tracking cost trends,” he said.