Mining

Good news for one of South Africa’s most important employers

South Africa’s mining sector has battled strong headwinds over the past two years, with companies slashing jobs to stay profitable. 

However, this might soon change as Euromonitor research indicates that demand for commodities will rise in 2025, pushing up prices and boosting mining companies’ earnings. 

Once the lifeblood of the South African economy, the mining industry’s output has declined significantly over the past few decades. 

This has resulted in the sector’s employment declining, with thousands of miners losing their jobs. 

Despite this, it remains one of the most critical industries in South Africa, employing over 470,000 South Africans and generating vital foreign exchange earnings for the country. 

It also remains crucial in terms of employing low-skilled workers, who make up the majority of South Africa’s unemployed. 

While mining employment recovered gradually after the pandemic, supported by higher international commodity prices, the decline in the prices of most commodities since mid-2022, alongside increased costs, contributed to profitability pressures. 

In addition, logistical constraints caused by Transnet’s challenges continue to weigh on employment creation in this sector.

Mining is a highly cyclical industry, with the fortunes of companies and those they employ largely dictated by commodity prices. 

As commodity prices experienced a downturn over the past two years, local mining companies came under financial pressure and have cut jobs to stay profitable. 

With commodity prices decreasing sharply since their 2022 highs and remaining flat through 2024, mining sector employment has come under pressure.

This is shown in the graph below from the Reserve Bank’s latest Quarterly Bulletin. 

This is set to change in 2025 as demand for commodities picks up due to several driving forces. 

Chief among these is the ongoing artificial intelligence (AI) boom and the accompanying rapid buildout of data centres. 

This drives prices higher for many commodities, chief among them copper, iron (for steel), and other metals, Euromonitor’s Justinas Liuima said in a recent research note. 

He explained that this may take a while to play out as the increased demand for commodities eats up excess inventory before turning to new supply. 

Thus, Liuima said the AI and data centre boom could add to the higher price pressures in the long term and impact the manufacturing sector, especially if the supply of commodities fails to meet faster demand growth.

Copper miners are expected to benefit the most from the build-out of new data centres as they are energy-intensive and require significant investments in cabling. 

Data centres use a variety of metals within processing and power delivery units, such as lithium, nickel, cobalt and copper. 

Copper is a particularly important metal for the data processing industry as it is used in wiring, connectors, switches and supporting power control units.

Euromonitor’s research indicates that global demand for copper is expected to increase by 20% in the coming years, with the other metals also seeing a jump in demand and price. 

Crucially, South Africa’s major platinum miners may receive a significant boost in 2025 as sentiment towards the sector changes due to slowing demand for fully electric vehicles. 

One of the most common uses for platinum is in catalytic converters that reduce the emissions of traditional internal combustion engines and hybrids. 

The soaring demand for electric vehicles threatened this significant market for platinum as they do not require catalytic converters. 

While global electric vehicle sales rose by 25% in 2024, driven by demand from China, this includes sales of plug-in hybrids, which have grown in popularity as an alternative to fully electric vehicles. 

In some major markets, such as the European Union, the sales of fully electric vehicles declined in 2024 as consumers prefer hybrids. 

This shift may provide a much-needed tailwind for platinum miners as its largest market may remain economically viable for longer than expected. 

However, as with the tailwind from the AI and data centre boom, this may take time to play out as vehicle manufacturers switch up their model ranges and powertrains to capitalise on this trend. 

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