Platinum strikers look set to lose

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AngloPlatStrike Reuters.

Johannesburg - Labour brought a machete to a gunfight with management in the platinum belt.

Small wonder it looks set to lose.

The platinum strike has highlighted issues ranging from cash reserves to changing market dynamics that have curtailed labour’s ability to influence prices.

The result has been to expose the weakness of the miners in any confrontation with producers.

As it marked its 13th week, the showdown took a dramatic turn on Thursday when marathon wage talks collapsed.

The world’s three top producers say they will take their latest offer directly to employees.

They are forcing the hand of the Association of Mineworkers and Construction Union (Amcu).

Amcu’s leaders were reluctant to take the latest offer back to their members – probably because they feared the rank and file would accept it after three months with no pay.

 

The companies – Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin – are in a more robust financial situation than the strikers, even though they have lost close to R15 billion in revenue.

The 70 000 strikers have lost R6.5bn in wages so far, according to the industry.

Unlike the companies, few will have savings to weather the storm.

A Reuters analysis last year of the pay package for entry-level mine workers found that it would meet the basic needs of a family of four, but not much else.

Many extended households are twice that size or more.

Analysts say the companies may be hurt but can survive and even emerge leaner and more profitable.

A painful restructuring and job cuts are likely, with the focus on Amplats’s Rustenburg operations.

If the Amplats share price is anything to go by, investors agree. It has risen 17 percent since the start of the strike.

“Investors know that if Amplats shuts down everything and just keeps the northern rim of its operations going, it will probably pay a bigger dividend than keeping everything going,” said Peter Major, a fund manager at Cadiz Corporate Solutions.

Amplats and parent Anglo American have also signalled that they see the future in more mechanised operations.

That is another advantage capital holds.

Workers’ lack of skills not only constrains productivity but also gives them few bargaining chips if it comes to a choice between them and technology.

Amcu and its president, Joseph Mathunjwa, also made a fatal miscalculation when they bet the union could wring concessions by driving up the metal’s price.

That is a double-edged sword.

A higher price can cushion producers if they have unaffected operations. But it can make their customers edgy and set off a scramble for alternatives.

But spot platinum is about 2.5 percent cheaper than it was on the eve of the strike.

“So if there is little platinum, why doesn’t the price go up? I told you that they are manipulating it,” Mathunjwa thundered at a recent rally.

Wider forces are at work, though perhaps not in a way that Mathunjwa envisions.

For one thing, above-ground stocks seem to be adequate to meet demand, which remains sluggish.

This is partly because the industry learnt its lessons from 2012, when Amcu burst on the platinum belt in a wave of violent, wildcat strikes that hurt production badly.

Amplats fell 0.88 percent to close at R505.50 on Friday.

Lonmin dropped 0.29 percent to R51.40 and Implats shed 1.58 percent to R120. – Ed Stoddard for Reuters



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