By William Clarke and Jon
South African miners are bemoaning the
strengthening rand, up by nearly 9% against the US dollar so
far this year, because it is eating into their profit
This represents a change in fortunes for
miners, who have long enjoyed the benefit of an ever-weakening
Miners benefit from a weaker currency as
they pay their costs in rand, while receipts are denominated in
The South African currency finished 2018
down by nearly 15% against the dollar.
The currency has been under pressure from
an increasingly bearish attitude to emerging market debt,
uncertainty over Chinese demand for minerals, and turbulent
South Africa is going into its 2019
general election with increased calls for land reform, and an
ongoing corruption scandal rocking the ruling ANC party.
But the currency changed direction in
2019. It has been the beneficiary of a weakening dollar, with
the US Federal Reserve suggesting that it may take a more
cautious approach to quantitative tightening and interest rate
As of February 6, the rand was 13.40 to
the dollar, compared to 14.41 to the dollar on January
This is bad news for the rand-denominated
profits of miners.
A trader working for one major mining
group told Fastmarkets that "we are hurting and have raised
prices to compensate for the currency movements."
"The rand has been a shock," he added.
"The dollar weakness is killing our business."
And a South African producer of
metallurgical and non-metallurgical chrome products said: "The
rand has been strengthening against the dollar, which may mean
that producers could try to increase their dollar-based selling
prices to maintain the same margin in rand".
However, non-metallurgical chromite prices
remain under long-term pressure from low demand.
Fastmarkets price assessment for chemical-grade chromite, 46% wet bulk, was
$220-270 per tonne fob South Africa on February 5, unchanged
week on- week, but down from $230-290 per tonne at the start of