Platinum output grinds lower, but not fast enough to boost prices – by Jan Harvey and Zandi Shabalala (Reuters U.S. – May 17, 2017)

LONDON – South Africa’s platinum output is grinding lower as producers cut capital expenditure and shutter unprofitable areas, but it is not happening fast enough to tackle the industry’s bigger problem – rock-bottom prices for the metal itself.

Platinum prices in dollar terms are up just 4 percent this year in the face of a much bigger rally in other precious metals like palladium and gold, and are 32 percent below their 10-year average of $1,375 an ounce. In rand terms, they have fared even worse this year, pushing into the red as the rand strengthens versus the dollar, eroding what little support the miners had.

That is not making the sector particularly attractive for investors, with the Johannesburg platinum index underperforming the main stock index this year. That reflects the failure of the sector to respond more dramatically to the economic realities of falling prices while also battling a strengthening rand and regulatory uncertainty.

Some producers see a need for a much-needed shakeout which has yet to happen. “Current metal prices cannot sustain the industry,” said Johan Theron, spokesman for world no. 2 producer Impala Platinum. “Without the required price support the industry will inevitably contract and restructure to the point where a new equilibrium is found with the requisite price support at a lower production/supply level.”

That restructuring is a long time coming. Despite pressure on the sector and cuts from the top five producers through 2016, South African platinum mine output was still marginally above 2013’s level last year.

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