SA platinum market to remain uncertain during 2014 – by Leandi Kolver (MiningWeekly.com – January 7, 2014)

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JOHANNESBURG (miningweekly.com) – The South African platinum market is expected to remain unpredictable during 2014, but might not be as volatile as it was in 2013, Deloitte associate director Dr Jacek Guzek said on Tuesday.

He stated that the major issues, which kept the industry in crisis over the past two years, such as the unchanged platinum group metals (PGMs) basket price and the ever-increasing wage bill, still persisted.

“South African production in 2014 is either going to stagnate or decrease further. The platinum industry is in crisis for a second year going and there is no end in sight,” Guzek told Mining Weekly Online.

He explained that the industry crisis impacted negatively on production as it led to the systemic holding back of expansion capital by junior and major PGM producers, while, simultaneously, existing mines were becoming older, deeper and more difficult to mine.

Guzek added that the country would also still be faced with labour issues during the course of the year.

“At the moment the rand-dollar exchange is bailing the industry out,” he said, noting that this would not be the case forever.

Meanwhile, Venmyn Deloitte MD Andy Clay stated that the problem with South Africa, from a macroeconomic point of view, was that it did not have a clear economic strategy emerging from the current government, which deterred investment.

“[The industry is faced with] structural difficulties emerging from the current political system,” he said.

Further, Guzek stated that there was currently a critical undersupply of platinum that would continue and, if basket prices increased significantly during the year, it could lead to increased recycling.

PGMs authority Johnson Matthey also stated in its Platinum 2013 Interim Review, published in November last year, that primary platinum supplies were unlikely to grow significantly in 2014.

“In the last few years, productive capacity in the South African platinum industry has been seriously eroded by mine closures, declining labour efficiencies, falling ore grades and a failure to ensure the timely commissioning of replacement projects. Next year will see the full impact of a fresh round of shaft closures, this time at Anglo American Platinum’s Rustenburg mines, cutting capacity by 250 000 oz/y of platinum. Thus, even in the absence of further disruption due to industrial action, an early return to growth in platinum output is unlikely,” the report stated.

However, in contrast to the weak outlook for supplies, the prospects for demand in 2014 were positive as global industrial production was expected to rise strongly, Johnson Matthey said.

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