Data published yesterday showed South Africa’s mining production fell 2.7% y/y in January, deepening from December’s 2.4% decline, with a 1.2% m/m contraction. Iron ore (-15.1%), PGMs (-3.8%), and coal (-4.4%) were the largest drags, while manganese ore surged 21.2%. Mineral sales at current prices also weakened, down 5.9% y/y, as gold (-21.1%) and chromium (-26.8%) saw sharp declines, partially offset by a 14.2% rise in coal sales. Despite elevated commodity prices, inefficiencies in the sector limit South Africa’s ability to capitalise. Looking ahead, the sector remains under pressure from volatile global demand and persistent local challenges. While coal and manganese offer temporary support, a sustained rebound hinges on stabilising domestic operations and a more favourable global commodity cycle. Structural improvements will be key to reversing the industry’s ongoing contraction.
Similar weakness was reflected in manufacturing production data yesterday. South Africa’s manufacturing sector started 2025 on a weak footing, with production contracting 3.3% y/y in January, deepening from December’s 1.2% decline and missing the forecasted 1.9% drop. The contraction was driven by petroleum, chemical products, rubber & plastic (-9.1%), food & beverages (-3.2%) and motor vehicles & transport equipment (-10.1%). A bright spot came from wood & paper products, which grew 5.6% y/y. South Africa’s deindustrialisation trend is accelerating. Absa’s PMI fell for a fifth consecutive month, underscoring the sector’s struggles. Further headwinds loom, with US steel and aluminium tariffs under Trump set to impact major producers. Meanwhile, the closure of ArcelorMittal’s Newcastle plant at January’s end will further strain the industry and broader economy.
ZAR Markets
While global markets navigate US President Trump’s tariffs, the ZAR also has its own local factors to contend with at the moment. Investors, curious about how the GNU was going to frame this week’s budget disagreement, will be uncomfortable with what has unfolded. Recall that after the postponement in February, there was a concerted effort by GNU parties to highlight that the coalition was still healthy. This has not been the case this time around, with the DA and ANC criticising each other publicly as if on the campaign trail. For now, though, the market’s reaction has been muted, with the ZAR consolidating south of R18.4000/$. It is, however, telling that the ZAR has not been able to take advantage of the dollar’s broader decline in recent weeks.
Global FX Markets
The U.S. dollar strengthened broadly, with the dollar index rising 0.1% to 103.95, marking its third consecutive day of gains this morning. This uptick followed a period of volatility sparked by escalating global trade tensions, particularly after President Donald Trump threatened a 200% tariff on European wine, cognac, and other alcoholic imports. This move was a retaliation to the EU’s planned levies on American whiskey and other goods, set for next month, which itself responded to Trump’s earlier 25% tariffs on EU steel and aluminium implemented this week. The euro weakened to $1.0847, retreating from a five-month high reached on Tuesday. Other currencies showed mixed responses: the British pound hovered at $1.2945, down from a Wednesday peak of $1.2990, ahead of UK GDP data. The Japanese yen, after hitting 146.545 earlier this week, eased to 148.32 per dollar (up 0.35%), supported by safe-haven demand and expectations of a Bank of Japan (BOJ) rate hike later in 2025, though the BOJ is expected to hold steady next week pending wage negotiation outcomes.