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We take a look at the year on year inflation rate in some of South Africa's biggest exports, Coal, Metal Ores and Iron Ore. By how much have the prices of these items being exported from South Africa to the rest of the world gone up over the last 12 months? We expect to see a sharp jump in the year on year price increases in Iron ore, following the Vale mine dam collapse in Brazil which raised supply concerns for Iron ore and sent the prices skyrocketing.
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Prices of some of SA's biggest exports rising sharply year over year?
The graphic below shows the year on year inflation rate as measured by Unit Value Indices published by Statistics South Africa. Unit Value Indices measures the average unit value for product and them calculate the inflation rate of this average unit value over time. Unit Value Indices are used to estimate or approximate inflation rates of goods being imported into and out of South Africa
So the above clearly shows the significant increase in the price of Iron Ore exports from April 2018 to April 2019, with Iron ore prices being almost 47% higher than a year ago. Metal ore prices are up almost 18% compared to a year ago while coal increased a more modest 7.14% over the last year. But its not all sunshine and roses for Coal, Iron Ore and Metals. Below an extract from our South Africa Mining industry page in which we discussed the volumes mined and value of sales as at January 2019 this year. Production volumes on Iron Ore was significantly lower than a year ago, and this during a time when we should produce as much as possible to benefit from the substantially higher price. So to the extract of our South African Mining page we go.
start extract
So lets start with coal, while the volume of coal mined during January 2019 is almost 6% lower than a year ago, the sales values are up almost 12%, indicative of rising prices fetched for coal. Perhaps ESKOM paying more? Or demand internationally is leading to more coal being exported to more lucrative off shore markets.
Iron ore showed a massive decline in terms of the volumes mined (about 25% lower than a year ago), but a very sharp increase in the sales values fetched. This is largely due to sharp increases in the international iron ore prices after one of the biggest Iron ore mines, which belongs to Vale in Brazil had to stop operations after one of their dam walls broke and caused massive damage, flooding and lead to the death of numerous people in Brazil. Government there ordered the halt of operations at the relevant which lead to supply shortages fears and saw the price of Iron ore sky rocket. A big benefactor of this is Kumba Iron Ore.
end extract
So lets start with coal, while the volume of coal mined during January 2019 is almost 6% lower than a year ago, the sales values are up almost 12%, indicative of rising prices fetched for coal. Perhaps ESKOM paying more? Or demand internationally is leading to more coal being exported to more lucrative off shore markets.
Iron ore showed a massive decline in terms of the volumes mined (about 25% lower than a year ago), but a very sharp increase in the sales values fetched. This is largely due to sharp increases in the international iron ore prices after one of the biggest Iron ore mines, which belongs to Vale in Brazil had to stop operations after one of their dam walls broke and caused massive damage, flooding and lead to the death of numerous people in Brazil. Government there ordered the halt of operations at the relevant which lead to supply shortages fears and saw the price of Iron ore sky rocket. A big benefactor of this is Kumba Iron Ore.
end extract
So while prices are a lot higher than a year ago, we hope that South African firms can take advantage of the higher prices by producing more and selling as much as possible at the current elevated price levels. Strike while the Iron is hot is a pretty apt statement right now we think.