Platinum majors run low on metal
Johannesburg - The damage from the strike on the platinum belt, now in its 10th week, has producers stitching together plans to buy the precious metal on the open market to meet their contractual obligations.
Such a move could prove very costly for an industry trying to recover from the industrial mayhem that led to the Marikana massacre, when police shot dead 34 striking miners on August 16, 2012.
That Impala Platinum (Implats) and Anglo American Platinum (Amplats) are now contemplating sourcing the metal in the spot market signals the mounting cost of the strike involving some 70 000 members of the Association of Mineworkers and Construction Union (Amcu).
Numerous attempts to resolve the impasse over Amcu’s demand for the minimum wage to be hiked to R12 500 a month have come to naught.
“We definitely can’t continue to supply all our clients as we normally would have done,” Implats spokesman Johan Theron said yesterday. “Clearly we are now entering a period where normal deliveries are not possible anymore given that only 40 percent of our group mining activities are still in operation.”
He said Implats would meet supply contract with all South African clients and would prioritise “key” international clients at least until the end of the month. The company made all its deliveries last month.
Bloomberg reported yesterday that Implats might turn to the open market.
Meanwhile, Amplats had also declared secret force majeure with its contractors, Mining Weekly Online reported yesterday, adding that the platinum producer had sent letters to suppliers to explain conditions that would prevent it from fulfilling its contracts.
Amplats, which is the largest platinum producer, was also considering buying the metal in the open market, chief executive Chris Griffith told journalists on Friday.
Of the three companies affected by the strike, only Lonmin has not said whether it would seek alternative avenues to source the metal.
By the end of last week the strike was estimated to have cost the industry more than R10 billion in revenue and workers R4.4bn in lost wages.
Supply disruptions and news that the top three producers might source the metal from the open market could underpin spot prices going forward, but the move would add to the costs that the producers already face as their production remains crippled.
Yesterday afternoon in London platinum was fixed at $1 429 an ounce (R485 293 a kilogram), up $11 from Monday’s second fix. The gold/platinum ratio, which measures the number of gold ounces needed to buy a platinum ounce, rose to a two-month high at 1.11.
South Africa accounts for more than half of the world’s platinum supply.
Finding alternative supply channels could prove to be challenge, Charles Stanley Securities commodities and mining analyst Kieron Hodgson said.
“Replacing platinum from South Africa is difficult because there is a risk in Zimbabwe from the indigenisation law and Russia is on the verge of sanctions,” he said, adding that in the worst case scenario, the companies had between six months to a year of stockpiles to plug some of the gaps.
Key suppliers to the platinum industry said yesterday that they were keeping a wary eye on the developments on the platinum belt around Rustenburg as the impact of the strike began spreading across the industry’s value chain.
“Like all other suppliers, the company is eager for a resolution,” said Wayne du Chenne, an executive director at AECI unit AEL Southern Africa, which provides explosives to the platinum mines. – Additional reporting by Bloomberg