Platinum. Picture: THINKSTOCK
Picture: THINKSTOCK

SOUTH Africa’s platinum production has fallen to 11-year lows, pushing the global market into a deficit as strikes, safety stoppages and mine closures cut production from the world’s largest supplier, analysts Johnson Matthey said on Tuesday.

Anglo American Platinum (Amplats), the world’s biggest producer, lost at least 170,000oz of platinum during an eight-week strike and is struggling to convince workers to return to work.

The market for platinum was forecast to slip into a deficit of 400,000oz with disruptions in SA removing 600,000oz from supply this year, said Jonathan Butler, author of Johnson Matthey’s 2012 interim review.

Platinum from SA would fall this year to 4.25-million ounces from 4.85-million, Mr Butler said. The global market had a 430,000oz surplus last year.

The forecast was based on output up to the end of September. But in October and November, Amplats was crippled by wildcat strikes at its Rustenburg and Pilanesberg operations. Johnson Matthey used 50,000oz of lost Amplats production in its calculations, Mr Butler said.

The global supply of platinum, which includes output from mines in Russia, North America and Zimbabwe, is at the lowest levels since 2000 — at 5.8-million ounces, it was 10% below output last year.

"It’s now apparent that stoppages have run at a fairly high rate into the fourth quarter, so our eventual supply number for 2012 could well be lower than we are forecasting for SA," he said.

Mr Butler said that the operating environment for SA’s platinum producers had deteriorated this year.

There had been a six-week strike at Impala Platinum, a violent strike at Lonmin and there is a continuing wage dispute at Amplats. Aquarius Platinum this year suspended its Marikana and Everest mines.

"Even before the unprecedented disruption we’ve seen in the second half, producers were already considering restructuring their low-margin operations in the light of weak prices and high costs," Mr Butler said.

"Some of the wage settlements we’ve seen subsequently have only added to cost pressures for some of those producers. It seems highly likely over coming months that some operations in SA will come under close scrutiny with the possibility of further closure and consolidation.

"This leads us to the view that supplies in 2013 are unlikely to grow significantly from 4.25-million ounces we are forecasting for this year."

Johnson Matthey sees liquidity in the platinum market as it digests surpluses in previous years. The relatively muted price reaction to strife in the country and low lease rates — the price at which banks or fabricators lend platinum — indicated that there was enough metal to satisfy immediate needs.

Amplats will release the results of a year-long review of its entire business before the end of the year, and the market is widely anticipating the suspension of loss-making operations.

Derek Engelbrecht, Impala Platinum’s marketing executive, told a conference in Hong Kong on Monday he expected lower output from SA and job cuts as a result of rising costs and a drop in productivity.

"We think the market is moving into deficit this year, based on a significant decline in South African supply and a small reduction of jewellery being recycled because of lower prices," he said.

"With relatively stable demand, it will push the market into deficit."

With Reuters