Stronger rand keeps a lid on platinum

The strengthening of the rand had extended the six-year run of poor platinum prices, keeping fresh investment in new production in SA, the largest source of the metal, on hold for a while longer, CEs of SA’s platinum mines said on Tuesday.

The platinum price had been weak for six years despite six successive years of deficits, said World Platinum Investment Council director of research Trevor Raymond at the African Mining Indaba.

“This caused confusion, mistrust and a huge amount of negative sentiment.”

While the price in dollars has started to recover, the strengthening of the rand because of a weakening dollar and improving sentiment towards SA amid political change in the ANC as well as commitments to weed out corruption has delivered an unwelcome knock to local platinum miners.

“We’ve seen a muted price environment and a very strong rand recently so we’ll see price and profit pressure on some assets and that will mean that in this environment, there’s unlikely to be any expansion of our production,” said Chris Griffith, CE of Anglo American Platinum, the world’s largest source of the metal.

Platinum supply from recycling is almost as much as from Anglo American Platinum.

Supply from mines in SA has fallen because of a lack of investment in new projects and the closure of old and unprofitable production by a number of companies. South African platinum production has fallen to about 4-million ounces a year from a 2006 peak of 5.3-million ounces. The decline is unlikely to be reversed soon and will at best keep steady.

“The CEOs here deserve credit … they’ve worked hard to cut production and reshape their businesses. There are some green shoots but the discipline we’ve seen from them and bringing more robust businesses to the fore is what gives me hope, not supply-anddemand graphs,” said Hanre Rossouw, a fund manager with Investec, one of the biggest investors in platinum.