LONDON: Platinum output in South Africa is likely to end up lower than forecast this year due to snowballing labour and safety stoppages, supporting metal prices but boosting costs for producers and dampening share prices.
Many analysts had expected South African platinum production to rise this year, creating a global surplus of the metal, mainly used in jewellery and in catalytic converters to clean auto exhaust. South Africa is by far the world’s biggest source of platinum, accounting for three quarters of global output.
Announcements by miners of expansion plans helped to depress platinum prices last year, which fell by a fifth, but the firms are facing difficulties following through, said analyst Michael Widmer at Bank of America-Merrill Lynch in London.
“You have to look at what’s happening on the ground, and even if they wanted to increase production, it just looks challenging,” he said.
A significant wild card is an unexpected surge of labour trouble after a new trade union sought to challenge the dominant National Union of Mineworkers (NUM).
Impala Platinum, the world’s second largest producer of the metal, said last on Thursday it had dismissed 17,200 workers during an illegal strike after drillers downed tools followed by a sympathy strike amid the recruitment of workers by a new union.
“I think the most critical thing that is happening right now in the South African mining sector is that this new union is challenging the NUM,” said an analyst in South Africa who declined to be named.
The Association of Mineworkers and Construction Union (AMCU), which was also behind an illegal strike at Aquarius Platinum late last year, is using Implats as a test case, the analyst added.
“If they do manage to get recognition at Impala, it’s going to be open season — they’re going to challenge NUM all over the place and these guys are really quite radical.” The new union has not publicly stated its aims.