South Africa’s commodity sector faces a mixed outlook as cost and logistical challenges weigh heavily on mining companies. While improved rail and port operations from Transnet could provide relief to coal and iron ore producers, global uncertainties - following the election of US President Donald Trump last year - and rising operational expenses continue to cast a shadow over the industry.
Analysts suggest that elevated gold prices, driven by an unpredictable global economic landscape, may provide some respite, but the broader mineral commodities market is struggling with mounting pressures.
The nation, a key player in coal, manganese, gold, platinum group metals, and copper production, has been grappling with rising costs and logistic hurdles that have hindered growth. Industry setbacks, such as ArcelorMittal South Africa’s decision to close its longs steel business units, underscore the urgency of addressing these issues.
Bruce Williamson, a mining analyst at Integral Asset Management, said on Tuesday that some South African miners will receive a boost from improved port and rail services. Due to sluggish port and rail performance, ore stockpiles have been ballooning at mining sites.
“SA coal miners, as with iron ore will do well IF Transnet and Portnet could get back to normal (while) Mozambique (Maputo port) politics is also a swing factor,” said Williamson.
Commodity analyst, Giovanni Staunovo, said this week that iron ore prices have been advancing after Chinese import records boosted demand side dynamics for the year ahead.
After data showed Chinese steel exports rose to highest levels since 2025, sentiment turned positive that gains in the price of the steelmaking material would persist.
Williamson said, “Given the big kick back against ESG and climate change, fossil fuel pressures are reduced” although he was positive that there will be “no shortages in the coal” market.
In terms of copper, a commodity that South Africa has been boosting in the past year, “positive forces are waiting to be unleashed as reduced new mine output and tight non-China refining capacity” builds.
Manganese producers also required port and rail issues in South Africa to be solved speedily. Top producers such as South32have already been raising production despite lower prices of the commodity.
Nonetheless, prices for manganese have “moved quickly between profit and loss even during normal business cycles” in the recent past.
Investec economist Annabel Bishop is concerned that the pace of increase for mineral commodity prices will be muted this year. The S&P Global PMI Commodity Price & Supply Indicators report also indicates that the increase in commodities’ prices “remained below the long run average” with solid economic growth.
“The (commodity) prices are not running at inflated levels, with indices recording prices well below the recent highs of 2021 and early 2022. Metals prices actually moderated over the course of Q4.24, dropping back to levels at the start of Q3 2024” said Bishop.
Due to significant cost pressures, PGMs’ base metals basket price remains “in bottom” territory, said Williamson.
“The demand side is being impacted by ICE volumes being lost to EV volumes (now stabalising), weak economies and rising interest rates. Cuts in mine or recycling production or investment demand for Pt and Pd could see prices start recovering,” explained Williamson.
Although there is upswing potential for SA miners, the cost pressures keep mounting. The finalisation of Eskom’s April 2025 tariffs is likely to be a very big issue for the miners.
Added Williamson: “Cost pressures and pressure on miners suggests that the supply side will remain tight. The uncertainty is widespread.”
BUSINESS REPORT