South Africa: Mixed Fortunes for SA Export Commodities

SOME of South Africa's main export commodities have been under pressure in recent weeks amid growing concerns about the global growth outlook.

Among such commodities are iron ore and coal.

Absa's economics unit noted since the end of July, iron ore prices have fallen sharply by 23,9 percent partly due to market concerns that weaker industrial activity and infrastructure investment in China could weaken demand for the commodity.

Coal prices have also taken a dip, having declined by 7,7 percent since the start of August.

Iron ore and coal exports accounted for 4,5 percent and 6,6 percent respectively of total rand value of merchandise exports in 2018.

Absa however noted platinum prices have held up relatively well, having declined by just 0,8 percent since August.

Platinum group metals (PGMs) exports are a bigger contributor to South Africa's earnings, accounting for 8.3 percent of the total rand value of merchandise exports in the past year.

Gold prices have also increased by 8 percent since the start of August.

"Nonetheless, on balance, the performance of South Africa's export commodity prices will likely offset the effect of the recent moderation in Brent crude oil prices," Absa economists stated.

Meanwhile, Standard Bank projects the Rand currency to drop its value further against the United States Dollar in the wake of the US-China trade war.

"This ongoing trade war has kept financial markets in flux for near two years now," said Shireen Darmalingam, macroeconomic analyst at Standard Bank South Africa.

She said the Rand shed a lot of ground, weakening by 8,9 percent since the beginning of July and by 8,2 percent since the beginning of August.

The bank has therefore adjusted its 2019 average for the rand to R14,24/$ to R14,50/$ by year-end.

"However, some reprieve may be had from local policy reforms, should they eventually transpire," Darmalingam said.

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