Platinum market to remain in deficit in 2016/17 amid lower capex
The reduction in capital expenditure (capex) by South Africa’s platinum producers will limit output of the precious metal by as much as 16% in 2016 and 2017, compared with 2015 levels, a World Platinum Investment Council- (WPIC-) commissioned report, compiled by Venmyn Deloitte, projects.
The study, which tracks capital investment by producers over a 20-year period, estimates a decline in platinum output of more than 600 00 oz/y in 2016, owing to reduced capex.
“Such a fall will support ongoing deficits in the platinum supply-demand balance, even without growth in platinum demand,” the report states.
It further outlines that platinum production from South Africa has declined by over 500 000 oz/y, or 11%, from 2008 to 2013.
Over the same five-year period, capital investment in the South African platinum mining sector has declined by more than 40%, from R30-billion a year to R17-billion. Capital investment in 2014 was R13-billion, while published capital investment estimates for this year stand at R11-billion.
“We believe the decline in refined platinum production from South Africa associated with reduced capex will continue. This is in contrast to some surprising assertions in the market that South African platinum output is likely to rise over the next two years.
“The analysis by Venmyn Deloitte demonstrates that using capital intensity alone as an indicator, production in 2016 and 2017 is likely to be well below current levels,” WPIC research director Trevor Raymond says.
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