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Johannesburg - The platinum price is getting squeezed this year amid an oversupplied market but the industry will likely cut production if the rand strengthens to R11 to the dollar, according to NOAH Capital Markets mining analyst René Hochreiter.

The platinum price sank to $942 an ounce from about $1117.73 an ounce last year and $1017.44 an ounce in 2015.

Hochreiter said yesterday: “There is just too much supply of platinum and there is no sign that South African producers are going to reduce production.

“Only once the rand strengthens to R11 to the dollar will we see producers cutting production,” Hochreiter added.

Read also: Rand in biggest slide since 2015

South Africa is home to 80percent of the world’s known platinum reserves and the industry is a major employer in the mining industry with a workforce of 172000.

The platinum price’s tumble has hurt South African producers with Chamber of Mines chief executive Roger Baxter saying last week that at current prices half of the platinum sector were marginal, which was a challenge for South Africa.

Local producers are feeling the pinch of the strengthening of the rand, with Lonmin, the world's third-largest platinum producer, saying the exchange rate had contributed to a $146million (R1.88bn) impairment.

Last month, Anglo American Platinum chief executive Chris Griffith said the market was not largely optimistic about platinum group metals.

Also, Sibanye Gold chief executive Neal Froneman was reported to have said there was a “high degree of concern” for the economic viability of up to 300 000 ounces of Sibanye Gold’s platinum group metal (PGM) production should the slump in the rand basket price of the metals continue.

Meanwhile, South Africa’s Impala Platinum last week announced it planned to sell about $500m of unsecured bonds which would be convertible into shares with proceeds expected to be used to refinance its existing debt.

Impala, the world’s second-largest platinum producer, which mines in South Africa and Zimbabwe, said the 2022 bonds would include R3.25bn of rand-denominated convertibles and $250m of dollar-denominated convertibles.