SA ‘will miss platinum chance’

Mines not ready to fill huge shortfall

SOUTH African mining’s perennial problems with labour unrest and lack of investment are likely to scupper any chance of filling the 605 000 ounce shortfall in the global supply of platinum projected by refiner Johnson Matthey.

The projected deficit is the biggest in 14 years.

In the 2013 Platinum Interim Review, released yesterday, Johnson Matthey said the platinum market deficit would rise by about 265 000 ounces from last year’s 340 000 ounces. South African supplies would rise by 1 percent at most to 4.12 million ounces this year.

“We don’t think we will see much growth in platinum supply this year,” Jeremy Coombes, the general manager for marketing and publications at Johnson Matthey, said during a presentation yesterday.

Analysts said that with the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (Amcu) bracing for further showdowns with platinum producers, coupled with constantly increasing production costs, it was unlikely the industry would rise to the occasion.

“NUM and Amcu are preparing for a sector-wide strike and chances are the country will not make the most of the deficit,” Sibonginkosi Nyanga, a mining analyst at Imara SP Reid, said yesterday.

Johnson Matthey forecast strong growth in investment demand for the metal, saying it was likely to increase by 68 percent to 765 000 ounces this year.

Industrial demand would rise by 12 percent to 1.79 million ounces on the back of chemical sector growth as a result of the construction of new plants in Asia and the Middle East.

In a particularly hard year for local production, Anglo American Platinum, the top platinum producer, announced its plan to cut 250 000 ounces of annual capacity in the immediate future and 100 000 ounces in the medium term.

Royal Bafokeng Platinum (RBPlat) announced yesterday that it would cut R750 million from its capital expenditure to preserve cash amid weak metal prices and cost escalations.

Steve Phiri, RBPlat’s chief executive, said the cost saving would come from expanding the concentrator facility at its Bafokeng Rasimone Platinum Mine joint venture instead of building a new concentrator at the Styldrift mine, as was originally envisaged.

Michael Kavanagh, a metals analyst at Noah Capital, said RBPlat’s decision was hardly surprising as the industry faced a tough environment.

“Cash flows are rare and mining companies are trying to find innovative ways to become less capital intensive.”

Coombes said the unprecedented uptake by investors in exchange-traded funds (ETFs) would lift demand this year.

“South Africa played an important role in overall demand this year, with Absa’s ETF accumulating 660 000 ounces of the metal between its launch in April and the end of September.

“The ETF is the first to be readily accessible for South African institutional investors, who are subject to limits on overseas investments, and it therefore benefited from pentup demand,” Coombes said during a presentation.

Local platinum producers are back on track after losing an estimated 750 000 ounces in production during last year’s labour strife, mine closures and safety stoppages.

Lonmin, the third-largest platinum producer, produced 751 000 ounces in the year to September, the biggest output in six years.

Coombes said auto catalyst demand would decline by 2 percent, reflecting weak demand in Europe and India for diesel cars. However, the use of platinum in heavy-duty vehicles would rise with a great number of diesel trucks having to meet strict Euro VI emission limits.

Johnson Matthey predicted the platinum price would range between $1 360 and $1 580 an ounce over the next six months, with an average of $1 465.

The average price was not far above yesterday afternoon’s London fix at $1 437 an ounce.

China’s demand for cars and lower Russian palladium sales should keep the palladium market in deficit and send its price to the highest level since mid2011, Johnson Matthey said.