SA platinum supply: between a rock and a hard place ( – September 20, 2016)

A lack of investment means the country’s platinum miners will need to dig deep to meet demands in the medium term. Their struggles are not dissimilar to those flowing throughout the South African mining industry – cost pressures, substantial declines in commodity prices, and low or negative profit margins.

But, says Andries Rossouw, PwC partner in assurance, the lack of investment in the recent past in South Africa’s platinum mining industry – due to the low-price environment and industrial action from 2012 to 2014 – will continue to put pressure on the existing supply deficit.

“SA’s platinum miners had to cut cost and reduce capital expenditure in order to survive in the hope that normality will return to the platinum sector.” South Africa provides more than 70% of primary mined platinum supply and more than 55% of total supply, including recycling.

Its supply conditions therefore has a significant impact on global supply and should therefore impact the platinum price. The demand for platinum emanates largely from the autocatalysts (40%), jewellery (34%) and general industrial needs.

While recycling provides a meaningful contribution to supply, it is not sufficient to cater for the growth in the automotive demand. Current mining supply delivers 1,1oz of palladium for every 1,000z of platinum mined, while automotive demand is at a ratio of 2,3 to 1. A decade ago, this ratio was at 1,3 to 1 indicating significant substitution had taken place.

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