Storm moves on for now

After strikes that reduced workers’ income, and with demand for commodities low, the big labour battle didn’t happen after all

Ihave been trying to understand why the mother of all battles didn’t really happen in the mining sector as we were all expecting. Gold producers concluded their collective wage talks with minimal disruption in September, and the platinum producers continue to work separately to find resolution as we approach the end of the year.

So far, so good, though it had seemed like the perfect storm was brewing for a confrontation, given the demands of unions heading into talks.

Mining bosses put their single-digit offer on the table and, in the main, held firm. Disgusted union bosses took their offer to workers, expecting a chorus of support for strike action. Instead, they found workers tired from all the uncertainty of the past year.

And it’s understandable why an underground worker wouldn’t have the same appetite as last year to embark on another round of strikes. Through all the unprotected strikes of 2012, workers could have lost about 10% or more of their annual income.

After losing that much, it’s difficult to see workers being excited to go on yet another round of strikes a year later because of a “paltry” 7,5%-8% wage increase, which is comfortably ahead of inflation.

Worth noting is that the only platinum mine on strike at the present moment is Northam Platinum. Last year, the miner largely escaped the level of worker unrest that its larger peers such as Anglo American Platinum experienced in the aftermath of the Marikana crisis.

Tired workers and the waning influence of unions, even the once marauding Association of Mineworkers & Construction Union, both conspired to avert the catastrophe that our cover story in the Financial Mail’s July 12-17 edition warned of.

In addition, we’ve seen employers play hardball, perhaps emboldened by difficult market conditions.

Commodity markets are facing two monumental problems. The first is that virtually all the minerals we produce are still suffering an oversupply hangover from the 2008 economic slump. Second, and this speaks to precious metals or a safehaven metal such as gold — which is arguably less responsive to supply levels in the short term — demand quite simply hasn’t been there.

These factors, at the very least, must have influenced the tone of this year’s wage discussions.

On the basis of these two factors, the biggest threat that labour unions had over miners — the withdrawal of all labour — lost much of its sting. In fact, some hard-nosed mining bosses may cynically have looked forward to a few weeks’ production stoppage from a larger rival to help soak up surplus supply and boost the commodity price.

Because of the popularity of commodity-based exchange traded funds (ETF), large quantities of the world’s commodities remain idled in storage. It also hasn’t helped that mining houses such as BHP Billiton have in recent years seen iron ore expansion projects come on line, pressing on prices.

ETFs have perhaps been the main reason the platinum market has failed to really kick into gear this year, despite a better story around the global economic prospects.

Demand from European vehicle manufacturers makes up the bulk of demand for platinum, used in catalytic converters. Car sales growth in the region has increased for both September and October.

Yet despite this, the price of platinum is still over 5% weaker in the past month and, over the past 12, close to 15% lower.

That’s the platinum story. Gold, on the other hand, is suffering from a crisis of faith from investors and less physical demand from India, given that country’s currency weakness.

We may have steered clear of the storm for now. And the mediating skills of deputy president Kgalema Motlanthe may have done their bit. Let’s hope we’re as lucky next year. Derby is the deputy editor of the

Financial Mail derbyr@fm.co.za @ronderby