JOHANNESBURG (miningweekly.com) – Volatility in global oil markets could have far-reaching consequences for South Africa’s mineral export sector and push up commodity prices.

Warning this in a media release to Mining Weekly, United Manganese of Kalahari (UMK) chief executive Malcolm Curror points out that long-tail effects on shipping and energy pricing have already raised concerns across several commodity-dependent sectors where fuel costs account for a significant share of operating and logistics expenses.

Energy is embedded in virtually every stage of the mining value chain, from operating heavy equipment through to transporting ore by rail, road, and ship, and UMK will be limiting ore transportation by road where possible to reduce exposure to diesel.

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

“The highly interconnected nature of mining’s global supply chains results in movement in one part of the system tending to influence the entire value chain,” Curror explains.

On the shipping front, vessels are being rerouted while freight insurance premiums and transport costs have started to rise.

In addition to higher fuel input expenses, adjustments in global shipping patterns can tighten available capacity and raise costs for exporters.

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

“The past week has seen increases in jet fuel pricing of up to 70% along with already reported shortages of diesel in the agriculture production sector,” he notes.

Much of South Africa’s manganese 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, prolonged volatility is not ideal for either producers or consumers of South African exports, he adds.