Rising Fuel Costs Deepen Pressure on South Africa’s Mining Sector

South Africa’s mining sector is coming under renewed pressure as surging fuel prices linked to escalating geopolitical tensions in the Middle East drive up operating costs and weigh on production growth.

According to the Minerals Council South Africa (MCSA), the ongoing conflict involving Israel, the United States and Iran has sharply increased fuel expenditure across the mining industry, contributing to weaker production performance in March 2026.

Mining production growth slowed significantly to 2.5% year-on-year in March, down from 4.6% in January and 9.7% in February, highlighting growing strain within the sector.

The council said average monthly fuel spending for mining companies nearly doubled compared with last year, rising from approximately R2.9 billion in 2025 to around R4 billion in April 2026.

Despite the mounting cost pressures, several key mineral segments posted strong gains during March.

Platinum group metals (PGMs) recorded production growth of 10.5%, contributing 2.6 percentage points to overall mining output. The increase was supported by improved operational stability and recovering global demand for internal combustion engine vehicles.

Gold production rose 17.1% year-on-year, benefiting from heightened geopolitical uncertainty that boosted investor demand for safe-haven assets.

Manganese production also climbed 14.4% as Chinese demand strengthened sharply. China’s manganese ore imports surged 38% month-on-month to 3.2 million tonnes in March, while South African exports to China increased to 2.2 million tonnes from 1.4 million tonnes a year earlier.

However, gains in these commodities were offset by continued declines in coal, iron ore and diamond production.

Coal output fell 9.6%, marking the sixth consecutive monthly decline, largely due to weakening domestic demand. Although export volumes increased by 9.8% year-on-year, with shipments to India rising nearly 20%, domestic consumption still accounts for more than two-thirds of South Africa’s coal demand.

Iron ore production declined 2.7%, partly due to the closure of a mine placed under care and maintenance in late 2025 after losing its only domestic customer. Diamond production dropped 8.5% following a temporary rebound in February, with the industry continuing to face difficult market conditions.

The mining council said it is engaging stakeholders to explore support measures for struggling subsectors.

Despite weaker production growth, mineral sales revenues surged during the first quarter of 2026, underlining the sector’s continued importance to the South African economy.

Year-to-date mineral sales reached R242 billion, up 39% from the same period in 2025. PGMs and gold were the primary drivers of the increase, supported by sharp price gains in global commodity markets.

Rhodium prices rose more than 105% year-on-year, while platinum climbed 109.6%, palladium increased 62.4%, and gold advanced 62.8%.

The MCSA said the strong earnings performance demonstrates mining’s potential to support economic growth, investment and employment if backed by stable policy and regulatory conditions.

Based on current trends, the council expects South Africa’s mining production to increase marginally by 0.3% quarter-on-quarter in the first quarter of 2026.