Leading South African mining companies announced plummeting profits in the first half of 2023.
The Bureau for Economic Research (BER) has noted in their weekly newsletter that although mining and manufacturing output expanded during the second quarter according to the latest Statistics South Africa data, Glencore and Exxaro had reported steeply declining profits for the period.
Glencore announced a more than 50% year-on-year (y-o-y) drop in core profits amid falling commodity prices and poor rail performance.
“It must be said that these results come from a high base after commodity prices rose significantly last year when many countries fully opened after the Covid-19 pandemic,” the Bureau said.
Similarly, Exxaro expects a 37% profit dip for the first half of 2023.
“The company mentioned weaker fossil fuel prices and the impact of rail logistics problems as the key reasons for the decline.
“In the first six months of the year, Exxaro’s coal exports were down by 6% y-o-y due to the latter,” the BER said.
On a positive note, Trade, Industry and Competition Minister Ebrahim Patel said that companies from South Africa and China had concluded trade deals worth over R40 billion during a visit by China’s Commerce minister.
Anglo American Platinum, Glencore, Sappi and Pioneering Fishing were among the companies participating in the meetings, including 50 Chinese companies.
However, the Chinese economy is faltering.
New bank loans in China plunged by 89% month-on-month in July to the lowest since late 2009.
“Though lending tends to decline in July due to seasonal factors, the latest reading is 679 billion Chinese yuan below the same period last year.
The credit data also laid bare the continued weakness of the property sector.
Household loans, mostly mortgages, were contracted by over 200bn yuan y-o-y in July,” the Bureau said.
In more bad news, a decline in trade volumes – imports and exports – showed that domestic and international demand for Chinese goods remains weak.
However, Consumer Price Index inflation in the US remained stable month-on-month, albeit somewhat higher on an annual basis in July.
“This saw financial markets price in a reduced likelihood of another US Fed policy interest rate hike at the next Federal Open Market Committee meeting in September,” the BER’s economist said.
