Platinum 2013 Report – by Johnson Matthey

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An unprecedented fall in supplies from South Africa arising from a series of illegal strikes put the platinum market into a deficit in 2012. Through industrial action, safety stoppages and mine closures, producers in South Africa altogether lost at least 750,000 oz of platinum production. Industrial demand in 2012 was hit by a downturn in purchasing by the glass and electrical sectors, while investment demand was steady. Growth in demand for platinum autocatalysts in Asia and North America offset lower requirements from the weak European vehicle market.

Only the jewellery trade in China bought significantly more platinum, in order to supply an expanding jewellery retail network. The platinum price in 2012 was on average 10% weaker than in 2011, causing secondary recovery of platinum to decline as collectors of spent autocatalysts hoarded stock, waiting for better price opportunities to arrive.

A series of illegal work stoppages took place during the year at the mines on the western Bushveld operated by Impala Platinum, Lonmin and Anglo American Platinum. The first stoppage of the year started at Impala’s Rustenburg lease area in January and resulted ultimately in the loss of a third of the mine’s annual output. There was significant disruption in August at Lonmin’s Marikana operations, where the strike became violent and led to the loss of many lives, and between September and November at Anglo’s Union, Rustenburg and Amandelbult operations.

We estimate that losses from legal and illegal strike action in 2012 came to more than 600,000 oz of platinum, compounding
the pressure being felt by South African mining companies from above-inflation labour and energy cost increases, falling
productivity and torpid dollar pgm prices. Interruptions due to safety inspections, although less onerous than in 2011,
were a further drag on production and accounted for at least 70,000 oz of lost output.

These adverse factors began to make themselves felt in the form of mine closures, with three of the smaller mines in South Africa and one tailings reprocessing plant ceasing to operate, in all taking around a further 60,000 oz out of play in 2012. Even the major producers were not immune to the threat of cutbacks, as Anglo Platinum concluded a year-long review of its operations by announcing in January 2013 its intention to close shafts in order to reduce production capacity by up to 400,000 oz per year.

Changes to supply from other regions were relatively insignificant. Shipments of platinum from Norilsk Nickel’s operations declined by 2% to 660,000 oz. Total Russian supply, including production from alluvial platinum mines, fell by 35,000 oz to 800,000 oz. Supplies of platinum from North America in 2012 dropped by 55,000 oz to 295,000 oz, reflecting lower production of metal at Vale’s Canadian nickel mines. Shipments from Zimbabwe, at 340,000 oz, were unchanged.

Demand for platinum in autocatalysts rose slightly in 2012 to 3.24 million ounces. Depressed light vehicle output in Europe, combined with a lower market share for diesel vehicles, led to a significant fall in demand for platinum in the region. However, a rebound in output of vehicles in Japan, a continued surge in the manufacture of diesel vehicles in India and Thailand, and increased production of diesel pickup trucks in North America bolstered demand for platinum. The use of platinum autocatalysts for heavy duty vehicles improved marginally, while purchases of platinum more than doubled for catalysts to control pollution from construction, agricultural and other non-road diesel engines, which we now include in our estimates of overall autocatalyst demand.

Demand for platinum for making jewellery increased by 305,000 oz in 2012 to 2.78 million ounces. There was a surge of buying by manufacturers in China, in order to supply platinum jewellery to a growing number of retail outlets in Chinese cities. Manufacturers also took advantage of the relatively weak platinum price to increase stocks. In India there was wider distribution of platinum jewellery in the retail network. The discount of platinum to gold during most of the year made platinum jewellery more competitive with white gold in all markets.

Demand for platinum in industrial applications fell by 405,000 oz in 2012 to 1.57 million ounces. This was largely the effect of changing conditions in the glass industry, where excess production capacity, combined with the use of platinum from decommissioned plants and existing inventories, led to a fall in purchases. In the electrical industry, inventory adjustments and weaker demand for hard disk drives impacted purchases of platinum. Demand from the chemical sector was slightly lower than in 2011, while demand for platinum in medical, petroleum refining and other applications was stable.

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