JOHANNESBURG (miningweekly.com) – The South African platinum market is expected to remain unpredictable during 2014, but might not be as volatile as it was in 2013, Deloitte associate director Dr Jacek Guzek said on Tuesday.
He stated that the major issues, which kept the industry in crisis over the past two years, such as the unchanged platinum group metals (PGMs) basket price and the ever-increasing wage bill, still persisted.
“South African production in 2014 is either going to stagnate or decrease further. The platinum industry is in crisis for a second year going and there is no end in sight,” Guzek told Mining Weekly Online.
He explained that the industry crisis impacted negatively on production as it led to the systemic holding back of expansion capital by junior and major PGM producers, while, simultaneously, existing mines were becoming older, deeper and more difficult to mine.
Guzek added that the country would also still be faced with labour issues during the course of the year.
“At the moment the rand-dollar exchange is bailing the industry out,” he said, noting that this would not be the case forever.
Meanwhile, Venmyn Deloitte MD Andy Clay stated that the problem with South Africa, from a macroeconomic point of view, was that it did not have a clear economic strategy emerging from the current government, which deterred investment.
“[The industry is faced with] structural difficulties emerging from the current political system,” he said.
Further, Guzek stated that there was currently a critical undersupply of platinum that would continue and, if basket prices increased significantly during the year, it could lead to increased recycling.
PGMs authority Johnson Matthey also stated in its Platinum 2013 Interim Review, published in November last year, that primary platinum supplies were unlikely to grow significantly in 2014.
“In the last few years, productive capacity in the South African platinum industry has been seriously eroded by mine closures, declining labour efficiencies, falling ore grades and a failure to ensure the timely commissioning of replacement projects. Next year will see the full impact of a fresh round of shaft closures, this time at Anglo American Platinum’s Rustenburg mines, cutting capacity by 250 000 oz/y of platinum. Thus, even in the absence of further disruption due to industrial action, an early return to growth in platinum output is unlikely,” the report stated.
However, in contrast to the weak outlook for supplies, the prospects for demand in 2014 were positive as global industrial production was expected to rise strongly, Johnson Matthey said.
“Production and supply will be low [in 2014] and it will not match the demand which will grow stronger, [resulting] in the industry ending up with a deficit significantly higher than that of 2013,” said the company, adding that, therefore, the industry could expect price volatility, up to a point, that may result in, a sustainable price increase, a price spike or a period of unsustainable high prices.
However, Johnson Matthey stated that while the platinum market was expected to be in significant deficit for a third consecutive year in 2014, it might not be sufficient to support higher platinum prices as long as the market remained adequately supplied from above-ground stocks.
Further, the report stated that Zimbabwe was likely to produce more platinum in 2014, with the ramp-up at Zimplats’ Phase 2 expansion ensuring further growth in shipments.
Guzek agreed that Zimbabwe would be one of the jurisdictions to watch during the coming year, adding, however, that should mandated beneficiation, as was being discussed, be implemented, there would be a lot of metal stocked in Zimbabwe without the ability to process it all.
LABOUR
Guzek stated that, while labour issues in the South African platinum sector during 2014 might be better managed than they were in 2013, the industry would not be free of industrial action.
“Also, the general opposition of the South African workforce to the economic restructuring of the industry and its return to profitability will not be better understood this year than the previous year,” he added.
At the end of 2013, the Association of Mineworkers and Construction Union had received certificates of nonresolution from the Commission for Conciliation, Mediation and Arbitration (CCMA), which enabled the union to embark on protected strikes at the mines of platinum producers Impala Platinum, Anglo American Platinum and Lonmin. Strike notices, however, had not yet been issued.
Meanwhile, workers were still on strike at Northam Platinum’s Zondereinde platinum mine in Limpopo.
The mining company on Monday stated that it was seeking to secure another meeting with the leadership of the National Union of Mineworkers (NUM) under the auspices of the CCMA in an attempt to end the strike, which began on November 3 last year.
The NUM’s most recent demands, which it tabled at a CCMA meeting on December 7, amounted to an average increase of 16% in wages and a 69% increase in the living-out allowance.
The world’s fifth-largest platinum producer said in a statement on Monday that this remained unaffordable for the company and was “out of kilter” with the settlements reached in the gold sector and between unions and several other platinum producers.
According to Northam, the company had lost R500-million in revenue as a result of the strike, with the loss in wages for Zondereinde employees now having reached R100-million.
Guzek said the current labour situation in the platinum sector could be compared with the gold crisis of the 1990s.
“There is an initiative aimed at solving [the labour situation], namely the Platinum Sector Peace and Stability Accord, which, in principle, was signed by all the stakeholders last year.
“However, while the parties verbally support the idea of a sustainable solution, so far, there is very little evidence that they all understand what a sustainable solution is. So, there is not a common understanding,” he said, adding that interunion rivalry further complicated this situation.
Clay added that he was not optimistic that the labour situation would be solved soon, especially as it was a hostile one that involved all industry stakeholders.