The principal risks are further fuel-cost pass-through, exchange-rate volatility and persistent uncertainty over international trade and energy supply.

The Mining Composite Input Cost Index of Minerals Council South Africa increased by 4.9% year-on-year (y-o-y) in September compared with 3.7% in August.

The 1.2 percentage-point acceleration signals renewed pressure on mining operating costs following the previous month’s moderation.

For producers, the implication is a more demanding cost environment. Given that the mining sector is predominantly a price-taker, the result will inevitably be a squeeze on profit margins and a reduction in, among other things, corporate income tax, the Minerals Council stated in a release to Mining Weekly on Thursday, November 12.

Costs in the coke and refined petroleum category rose on a month-on-month basis (8.6%) and a y-o-y basis (32.9%) in September, reversing the modest monthly decline recorded in August.

Coke and refined petroleum accounts for 5.51% of total mining input costs, so its sharp increase carries material weight in the composite index, whereas other chemicals (0.28%) and basic chemicals (2.30%) have a smaller influence.

Other chemicals and human-made fibres also exhibited pronounced cost pressure. Taken together, these movements point to renewed inflation in important operating inputs.

However, a category’s price increase should not be confused with its contribution to the composite index: that contribution also depends on its weight in the mining input basket.

The economic concern is the potential for fuel pressures to spread beyond direct purchases into suppliers’ transport and delivery charges.

For mining operations, this creates a risk of both immediate expenditure increases and subsequent cost-push increases as contracts are repriced.

The effect on profitability will depend on each operation’s input mix, procurement arrangements and ability to offset higher costs through productivity gains or stronger realised selling prices.

Annual input cost increases were at least 4% across all commodity groups covered in the brief.

Other mining and quarrying industries, coal and gold recorded increases above the sector average of 4.9%.

Iron-ore and manganese were 0.5 percentage points below the aggregate rate, while other metallic minerals and chrome were 0.4 percentage points below it. These relatively narrow gaps suggest that cost inflation is a sector-wide challenge rather than a problem confined to a small number of commodities.

Commodity-level cost inflation nevertheless does not establish which producers face the greatest financial strain. Margin outcomes also depend on output prices, production volumes and operating efficiency.

The outcome of the US midterm elections is likely to result in lower crude oil prices, which will in turn affect domestic fuel prices, which have escalated significantly since the war began. The second channel through which the midterms could affect mining input costs is interest rates.

While the rand-dollar exchange rate has remained stable since the elections, changes in US interest rates may influence the exchange rate: rand depreciation would increase the local-currency cost of imported fuel, machinery and other inputs, while appreciation could provide cost relief but reduce the rand value of dollar-denominated export receipts.

A second issue to address is the US placing South Africa on notice that the country will be excluded from the African Growth and Opportunity Act (Agoa) as from January 2027.

Agoa gives eligible sub-Saharan African countries preferential and largely duty-free access to the US market for thousands of products.

Exports from South Africa that would be affected include motor vehicles and automotive components, citrus and other agricultural products.

Raw minerals and metals exports will not be affected by the exclusion, as they do not generally rely on Agoa to access the US market.