JOHANNESBURG/LONDON, April 8 (Reuters) – As a strike by South African platinum miners enters its eleventh week, the likelihood that employers will bow to demands for better pay is receding and a drastic overhaul of the loss-making industry is looking more inevitable.
Faced with the tough bargaining stance of the Association of Mineworkers and Construction Union (AMCU), the companies appear increasingly likely to close or sell mines that are bleeding cash while they lie idle.
Before the strike began, around half of the country’s platinum shafts were losing money because of rising energy and labour costs and waning demand for the metal, used mainly in jewellery and in catalytic converters for cars.
To pacify AMCU, Anglo American Platinum, Impala Platinum and Lonmin would have to double entry-level pay over the next three years to 12,500 rand ($1,200) a month – a demand they flatly refuse. The industry has idled some production to shore up margins, but held back from tougher cuts for fear of a political backlash that could compromise its wider interests.
But the miners’ strike, the longest and most damaging in South Africa in decades, has now cost the industry over $1 billion in lost revenue and there is a growing sense that the companies have little to lose.
Anglo American Platinum (Amplats) already reconfigured the five mines it operates near the platinum belt town of Rustenburg into three, but they were still losing money.
Mark Cutifani, the chief executive of Amplats parent company Anglo American, told Reuters last week it could divest some of its South African platinum operations.
Asked if Rustenburg faced a bigger risk of closure or potential sale than other Amplats mines, Cutifani said “Absolutely.” Their closure could see around 22,000 or more jobs lost.
Amplats made a first attempt at restructuring last year, with planned cuts of up to 14,000 jobs, but it largely foundered on fierce resistance from AMCU and the government.
Selling many mines to new owners could give the industry more leeway to cut the costs that make much of South Africa’s platinum unprofitable to extract.
“The strike has the potential to have beneficial long-term consequences for the platinum industry as a whole,” Credit Suisse analyst Tom Kendall said.
“It is steadily resulting in a drawing down of refined inventories and has the potential to lead, eventually, to a more settled labour environment and a supply base that is ‘right-sized’ to fit demand growth.”
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