PLATINUM miners are cautious on the outlook for prices of the precious metal, which analysts say could rise to around US$1 125 by the end of next year. South African producers however continue to be haunted by cost increases, which they say are not keeping up with production.
South Africa is the world’s biggest producer of platinum, followed by Zimbabwe and Russia. Zimbabwe is also home to some of the major platinum producers with Anglo American Platinum, Impala Platinum (Implats) and Sibanye Gold all having operations inside both SA and Zimbabwe.
“Precious metals prices, led mainly by gold, have seen volatility in recent weeks, but the overall trend remains positive. The outlook for precious metals remains positive and experts project prices to rise 10.5% (in) Q4 2016 over the same period last year,” said Ricardo Aceves, senior economist at FocusEconomics.
Executives with some SA platinum miners have told Fin24 in the past week that persistently lower commodity prices are impacting relations with key stakeholders such as labour, markets and suppliers. In some instances, contracts for key suppliers need to be renegotiated to manage costs.
Analysts surveyed by FocusEconomics said in a report released on Tuesday that platinum prices will average US$1 007 per troy ounce in the fourth quarter of 2016. The report adds that the panel of analysts surveyed sees platinum prices rising gradually to US$1 125/oz in fourth quarter of 2017.
According to Johan Theron, spokesperson for Implats, the world’s second largest producer of the metal, labour relations remain a key consideration, but continue to improve across the industry after the devastating impact when Amcu unseated the NUM in large parts of the industry.
Productivity not keeping up with labour cost increases
“However, we have not seen labour productivity improve to the same degree, which remains the major challenge facing our industry – increasing labour costs against lower labour productivity,” added Theron.
Other SA platinum mining industry executives said the biggest challenge in 2015 was in fact the financial impact of depressed metal prices and the continued above-inflation escalation in major input costs, such as labour, power and other related goods and services.
However, rand weakness as well as lower global prices in oil and steel provided “some reprieve in the early parts of 2016”, although Theron said the industry remains vulnerable to depressed metal prices and cost escalation.
Other SA platinum producers hoping for a rosy platinum price outlook include Lonmin, a 1.3 million ounce producer of platinum group metals, and Northam Platinum. Workers at Northam’s Zondereinde mine only returned to work on Wednesday after an eight-day production stoppage owing to union rivalry.-fin24