JOHANNESBURG: A perfect storm of rising costs, labour unrest and weak metal prices has pushed South Africa’s platinum mining companies into radical restructuring, but they’ve held off unleashing what could be their most effective weapon production cuts.
South African output of platinum group metals jumped in the early part of this year as mining companies continued to ramp up production following last year’s record five-month strike. While that’s helping their businesses, it’s also feeding into a 35% platinum price drop over the last five years, which has been only partly offset by rand weakness. “If you are trying to identify a catalyst that will raise prices, the standout, most obvious one is producers reducing output,” GFMS mining analyst William Tankard said.
“(Mining companies) are doing everything possible, even to the extent of jeopardising the longer term futures of these companies, to maintain current output in the face of low metal prices, when the true answer is, there’s too much supply,” another mining analyst, who declined to be named, added. GFMS analysts at Thomson Reuters estimate that at least 500,000 ounces of South African production may need to be cut to lift prices, from just more than 4-million ounces in a typical year.
