Platinum supply plunges as mine strikes continue

Dineo Faku

The platinum market was expected to move into a deficit from a surplus last year, while supplies of the metal were to drop by 12 percent to an 11-year low as losses associated with strikes disrupted output this year, London-based research company Johnson Matthey said yesterday.

In its review for 2012, released yesterday, Johnson Matthey reported that supplies would fall to 4.25 million ounces in South Africa this year because of strikes and the decision by junior companies to suspend operations at unprofitable mines.

The Johnson Matthey research forecasts that the platinum market will move into a 400 000 ounces deficit this year from a 430 000 ounces surplus last year.

“At this point , the outlook of the South Africa supplies in 2013 is extremely uncertain but it is difficult to expect an increase in South African output of any great magnitude from the 4.25 million ounces we are forecasting for the year,” Johnson Matthey principal analyst Alison Cowley said.

The report has been described as a confirmation of the negative effect of the strikes over wages, which culminated in the police killing 34 protesters at Lonmin’s Marikana mine on August 16.

Impala Platinum spokesman Bob Gilmour said yesterday that the company agreed with Johnson Matthey’s view that both the platinum and palladium markets would move into deficit this year.

“We believe this situation could be maintained over the medium term due to a combination of increasing demand and constrained South African supply,” he said.

“This in turn would restore prices to levels required for further capital investment, which would be positive for the sector,” Gilmour added.

South Africa lost 300 000 ounces of platinum production in the first three quarters of the year because of strikes and safety stoppages.

Finance Minister Pravin Gordhan reported that an estimated R10.1 billion was lost to strikes and stoppages in the platinum and gold sectors since the beginning of the year in his medium-term budget policy statement last month.

Severe disruption to platinum group metals is expected to reduce sales from South Africa and result in a 10 percent decline in the worldwide supply of platinum to 5.84 million ounces.

Already, Anglo American Platinum (Angloplat), which supplies 40 percent of the world’s platinum supplies, is losing 3 000 production ounces of the metal a day as operations ground to a halt amid a strike over higher salaries.

In a bid to end the eight-week strike, Angloplat gave employees an ultimatum to report to work today or face dismissal.

Imara SP Reid analyst Percy Takunda said the deficit would widen if Angloplat employees did not return to work, while the problem should be resolved if they did return to work and production ramped up.

“You are going to see companies with operations under way making money as the platinum price reacts positively,” he said.

The platinum price had strengthened to $1 595 an ounce before sliding to fix at $1 585 in London yesterday afternoon.

The report indicated good news for the jewellery industry, citing that almost all of the platinum purchased in the first three quarters went into manufacturing platinum jewellery pieces to meet growing wholesale and retail demand.

The report forecast a 14 percent increase in jewellery demand to 1.92 million ounces.

Platinum is used in the production of jewellery, as well as in catalytic convertors to reduce emissions in vehicles.

Palladium, which is used in autocatalysts, will be in a worse supply position than platinum as it was expected that it would switch to a 915 000 ounce deficit this year from a 1.26 million ounce surplus last year, the report indicated.