On the cusp of a super cycle

By Leon Louw

The year 2021 kicked off with a host of steep upward trending curves making headlines. Some of these curves meant good news, others meant bad news (often sad news). And then there were those outliers that meant through-the-roof-great-news. The first two weeks of January 2021 saw a horrendous increase in worldwide Covid-19 infections as the second wave in African countries, and the third wave in some global countries, surged to record levels. With the rise in infections the death rate followed, plunging health sectors around the world in crisis.

South Africa, the leading mining jurisdiction on the continent, took strain, as mine workers from around Southern Africa returned from their year-end break to resume operations amidst a rising infection and death rate. But those keeping an eye on other curves, noticed a trend that would stir-up a hint of optimism.

Since October last year, almost all mineral and metal prices have gradually been heading north. Apart from gold, which had a field day in an uncertain world last year, demand for, amongst others, iron ore, manganese, coal, zinc, and tin, started running red-hot, with China emerging from the Covid-19 scourge with guns blazing. Some analyst went as far as calling it the next super cycle. Most surprising was coal’s strong rally despite concerns about carbon emissions. The China-Australia trade spat might benefit Africa as the Chinese market looks for new partners. The South African coal sector has already reported an uptick in Chinese off-takers and with the higher coal price, South African exporters will have a field day. Ditto for iron ore and manganese. As the mass vaccination programs starts making an impact on Covid-19 infections later this year, it all bodes well for mining, and the African mining industry in particular.       

Nevertheless, the rise and rise of the Platinum Group Metals (PGM’s), especially rhodium (mined as a by-product of platinum), is a boon for South Africa, which is the largest PGM producer in the world. Rhodium’s price has been steadily increasing since the beginning of last year, but in the second week of January 2021 it stunned the world by recording massive trading prices more than USD20 000 per ounce. Rhodium is mined as one of the metals in the PGM basket. Close to 90% of the world’s rhodium is produced from the upper group of UG2 orebodies, which is found mostly in South Africa. Zimbabwe’s platinum mines might also see the benefits as the worlds thirst for platinum continues unabated. Neil Froneman, CEO of PGM giant Sibanye-Stillwater, predicts that it is possible that the platinum price itself would reach USD2000 per ounce as the Chinese auto industry recovers after the Covid-19 knock. It does feel as if the world is heading for another mining super cycle. The question is whether Africa is ready?