Iron ore prices are anticipated to decline in the coming year, driven by increased supply and weakened demand from China, according to African Rainbow Minerals (ARM) chairman Patrice Motsepe and CEO Phillip Tobias. During the release of ARM’s financial results for the six months ending December 31, the executives noted that another contributing factor was the sustained weakness in platinum group metal (PGM) prices, despite otherwise favorable market conditions.
South Africa’s coal and platinum sectors play vital roles in its mining commodity exports. The executives explained that short-term increases in refined PGM exports from South Africa have outpaced market expectations, while Chinese imports remain sluggish.
Demand for PGM in Western markets, particularly in automotive sectors, has also been weak, with European sales under strain and high inventory levels in the U.S. resulting in temporary production cuts. Despite these challenges, Motsepe and Tobias remain optimistic about the medium- to long-term outlook for metals like platinum, palladium, and rhodium, anticipating support from the demand for internal combustion and hybrid vehicles in light of stricter emissions regulations.
On the front of iron ore prices, the executives expect China’s GDP growth to decelerate to 4.5% by 2025, marking the slowest rate in over three decades, excluding the pandemic years. A slowdown in economic activity has been noted, primarily due to declining real estate investment and a slowdown in consumption growth.
Additionally, global coal consumption is projected to decrease in 2025 and 2026, influenced by the global energy transition and decarbonization efforts. ARM has opted against new coal investments and will manage existing assets until they reach the end of their economic viability.
ARM’s interim dividend decreased by 33% to R4.50 per share, while the company retained a strong cash balance of R6.06 billion, down from R7.19 billion a year earlier. The decline in headline earnings to R1.52 billion, a 49% drop, reflects a downturn in the iron ore division’s performance.
Although manganese segment earnings improved due to higher average prices, lower export volumes and exchange rate fluctuations balanced the gains. Meanwhile, ARM Platinum reported a significant headline loss largely due to constraints in production at the Bokoni mine.
The struggles in iron ore are coupled with ongoing cost pressures, though there is progress in renewable energy initiatives, with ARM’s solar photovoltaic facility set for initial power delivery in 2025.