- No. 8 | 26th Februrary 2024
Learn more about all important trends in the precious metals markets in our market reports on a regular basis.
Cost-cutting is yet to slice into South Africa’s platinum production
Low PGM prices are pressuring mining companies’ balance sheets. Anglo American Platinum has announced the initiation of the Section 189 process for 17% of its South African workforce – most of which will be at the Amandelbult mine where production has been falling since 2019. The Section 189 process is a legal route to retrench workers based on operational requirements and includes a period of consultation, meaning headcount reduction will not be immediate. Sibanye-Stillwater has just concluded a round of retrenchments at its Rustenburg and Marikana operations.
Current production cuts are small in the context of the wider platinum market. However, they are an indicator of the direction of travel for PGM miners which may accelerate if low platinum, palladium and rhodium prices are sustained. South African platinum supply is forecast to fall slightly this year to 3.9 moz, including the minor reduction in output of 60 koz PGMs announced by Sibanye-Stillwater earlier this year and the closure of the Pilanesberg mine (~30 koz Pt) which are the only production cuts related to restructuring thus far. Despite the announced cutback in headcount, Anglo American Platinum forecasts no reduction in overall refined platinum production for 2024 and 2025 from its own operations.
Release of stockpiled PGMs may help to boost baseline mined production. Anglo American Platinum had 507 koz of 3E PGMs in concentrate stockpiles, part of which should be refined this year. Impala Platinum is also expected to process its stockpile of platinum, though this is likely to be later in the year owing to major smelter maintenance in Q1’24. In both cases, the severity of Eskom load-shedding this year will partially determine how much metal from these stocks reaches the market.
The rhodium price is unlikely to save marginal shafts in this price cycle. Major production cuts were avoided in 2016 and 2017 as the rhodium price began to rise before their implementation, and by 2018 the price had more than tripled over two years. Rhodium autocatalyst demand is forecast to decline in 2024 from gains made by BEVs in the auto market, a trend that looks likely to continue. Without bumper rhodium revenues, it is possible that cost-cutting could intensify, with cuts to production most likely to come from high-cost mines on the Western Limb of the Bushveld Complex. Last week the rand reached its weakest level against the dollar since October 2023, which will partially offset a fall in the platinum price. However, if PGM prices do not recover, then shaft closures may become inevitable.
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