Rising energy costs pose risks to South Africa's mining exports

United Manganese of Kalahari chief executive Malcolm Curror has warned that the South African mineral export market is vulnerable to the current global energy uncertainties. Image supplied.

Oil prices have surged sharply in recent weeks amid supply uncertainty linked to instability in parts of West Asia.

Movements in energy markets have already raised concerns across several commodity-dependent sectors, where fuel costs account for a significant share of operating and logistics expenses.

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Vulnerable

Curror said that the mining sector is especially vulnerable to sudden fluctuations in energy prices and maritime transport costs.

“Energy is embedded in nearly every stage of the mining value chain,” he said.

“It runs from operating heavy equipment through to transporting ore by rail, road, and ship.

“When fuel prices rise sharply, the cost pressures ripple through logistics networks, freight rates and ultimately pricing,” he said.

“Mining operates within highly interconnected global supply chains, so movement in one part of the system tends to influence the entire value chain.”

Shipping markets are also responding to increased global uncertainty.

Industry analysts have reported that vessels are being rerouted in certain regions, while freight insurance premiums and transport costs have begun to rise.

“Adjustments in global shipping patterns can tighten available capacity and raise costs for exporters, in addition to higher fuel input expenses,” Curror said.

“For a commodity exporter such as South Africa, logistics efficiency and energy pricing are crucial factors in maintaining competitiveness.”

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Stable environment needed

There has been significant market volatility, with concomitant increases in jet fuel pricing of up to 70% in some areas of South Africa, along with already reported shortages of diesel in the agriculture production sector.

South Africa is the world’s largest producer of manganese ore, a mineral widely used in steelmaking and industrial manufacturing.

Much of the country’s production is exported to steel producers in Asia and Europe, making the sector dependent on affected global shipping routes and stable freight costs.

While commodity markets can sometimes withstand input cost increases during periods of disruption, Curror warned that prolonged volatility is not ideal for either producers or consumers of South African exports.

“Commodity producers prefer stable operating environments where energy costs and shipping routes remain predictable,” he said.