Platinum has special South African significance, which presents an ideal opportunity for business, government and labour to work together to revive the falling fortunes of platinum-group metals (PGMs), the rising palladium price notwithstanding.
Huge emphasis needs to be placed on the demand side of the PGMs equation to preserve jobs, which are so crucial to the economy, and to create stability for this wonderful range of precious metals that clean the air above the cities of the world.
Corporate voices need to be raised on the value to the industry of producing platinum coinage and platinum being declared a reserve currency.
South Africa has a unique opportunity to lever off its long-standing experience in the production and marketing of Krugerrand coins and gold’s great record as a store-of-wealth reserve currency.
Dust must be wiped off concepts like Mandela coins in platinum and instating platinum as a reserve currency must be done in accordance with International Monetary Fund and World Bank rules.
Both steps have the potential to create significant new demand for platinum, which this month saw its price plummet from $980/oz to $890/oz.
At the time of going to press, it was still in the doldrums at $920/oz.
Observers see firm demand-side measures as having long-term benefits for PGMs, with ample opportunity for government and labour participation to preserve jobs.
The special economic zones in the process of being established by South Africa’s Department of Trade and Industry are also seen as ideal development grounds for the manufacture of platinum-using hydrogen fuel cells, and some platinum companies like Implats are building stationary fuel cell installations on their refinery sites to generate their own electricity.
While the rise in the palladium price is helping the overall PGM basket price, South Africa’s ratio of platinum to palladium is heavily weighted in favour of platinum and, while the rise in the rhodium price has been strong, it has also not been sufficient to move the price needle significantly.
Moreover, the strong rand is putting the rand platinum price 5% below where it was this time last year and combining with South Africa’s 6% to 8% inflation rate to squeeze margins.
It is damaging to PGMs, which are a national patrimony, that more than half of South Africa’s platinum industry is lossmaking at the current rand basket price for PGMs.
This means that a developing country like South Africa is subsidising the PGM-using developed countries of the north.
The uncertain political environment both domestically and globally is having a hugely negative impact on PGM prices, along with the swing away from diesel vehicles and the growth of the petrol-vehicle market.
However, even during this tough downturn, most of the platinum industry is continuing to put money into growing demand for PGMs.
Most of that investment is in Platinum Guild International, which promotes jewellery; in the World Platinum Investment Council, which promotes investment; and in the development of industrial applications for platinum, including fuel cells, by individual companies.
Long may that last.