JOHANNESBURG (miningweekly.com) – With South Africa’s once mighty grip on the world platinum market slipping, exasperated end-users are eyeing Zimbabwe as the heir to the platinum throne, top global platinum consultant Stephen Forrest said on Thursday.
Forrest, in South Africa for the Joburg 2013 Investing in Resources and Mining in Africa conference attended by South African mining’s who’s who, told Mining Weekly Online in an exclusive interview in Johannesburg that invested parties across the platinum value chain were viewing South Africa’s diminishing influence with concern.
Zimbabwe, Russia and North America had lower platinum group metal (PGM) ounce cash costs and received substantially higher by-product credits than South Africa, SFA Oxford’s director and principal consultant revealed.
Since 2009, there had been a fourfold increase in platinum recycling, from 500 000 oz in 2000 to more than two-million ounces a year.
“Put simply, recycling is now offering the industry Lonmin-sized output incrementally every five years,” Forrest’s research showed.
The platinum landscape was changing “fundamentally and irreversibly” as decades-old dynamics fell victim to a market wanting certainty and security.
In the wake of a trebling of South Africa’s total cash costs since 2003, South Africa’s main prospect of cash cost lowering was rand weakening.
In the same period, North American and Russian cash costs had risen only 1.4 times and 1.5 times, respectively, and Zimbabwe’s had doubled.
Since 2009, South Africa’s platinum supply had fallen from more than 70% of demand to only 50% of demand now.
“It’s clear that South Africa’s mighty market grasp is slipping,” the head of the UK-based firm of consulting platinum analysts commented.
Absa Bank’s launch of a platinum exchange traded fund (ETF) had shown that South Africa’s concentrated supply of 75% of the world’s primary platinum and 81% of its rhodium was no longer enough to secure a significant influence on price.
Although the ETF had absorbed more than 700 000 oz of stock, it had no price impact.
“However you slice it, South Africa’s influence on price, whether it be as a result of supply disruptions or higher costs, is reducing,” Forrest said.
The market had numbed to yearly calls for above-inflation wage increases without concomitant productivity, and the country faced the prospect of slipping to second, third or even fourth place as a global producer.
In contrast, Zimbabwe’s platinum resources, just over the border, were coming in at significantly lower cost and secondary recycled supply could become primary supply if demand growth continued.
“Is Zimbabwe the new South Africa? Quite possibly,” Forrest said, adding that PGM recycling in both the US and Japan was the new proxy producer.
Also working in Zimbabwe’s favour was its average shaft depth of only 230 m below surface compared with average South African shaft depth of 1 010 m below surface.
The balance of platinum power was moving and the market was demanding production free of supply disruptions and price premiums.
If South Africa could not supply the platinum that the world needed, other willing participants would take up the supply mantle, not the least of them recyclers.
BIG DEMAND POTENTIAL
Europe’s demand demise had already been more than taken up by China’s greater consumption, and other new frontiers of consumption were regions like South America and South East Asia, Forrest reported.
Japan was continuing to import well over one-million ounces of platinum a year from South Africa alone, even though its new-metal requirements had fallen to 600 000 oz a year.
Surpluses were being deposited increasingly in Swiss vaults.
China was expected to consume 2.5-million ounces of platinum this year, 500 000 oz more than Europe, and in the next decade, some 800 000 oz of platinum demand was expected to be legislated in China and 700 000 oz a year legislated in ‘new frontier’ countries, he added.