Strikes Prompt Fears of Rising Platinum Prices
South Africa’s beleaguered platinum mining industry has seen production levels fall as companies and unions go head to head over pay
Fears are growing that platinum prices could rocket if industrial disputes in South Africa, which accounts for 80 percent of the world’s platinum supply are not resolved soon.
Three of the largest producers, Lonmin, Anglo American Platinum and Impala Platinum have seen a total of some 80,000 miners down tools since the beginning of the year in disputes over pay.
The worst affected has been Lonmin, owners of the Marikana Mine, where once again the industrial action has led to deaths and violent clashes.
Lonmin has seen a 43 percent drop in its production, which it revealed in its half-year financial statement last week.
Chief Executive Ben Magara warned a restructuring and job cuts were inevitable given that some its shafts had already been loss making before the dispute, but the strikes had made the need more urgent.
Analysts agree that so far stockpiling, recycling and long production times have prevented the strikes from causing a spike in global prices.
However, if the issues are not resolved soon price volatility will hit and ultimately make an impact on platinum users such as the automotive industry and other sectors.
While the three companies involved will not reveal their stockpiles it is believed that most platinum producers hold up to four months’ of stock.
Latest figures for recycling of platinum also shows a significant rise from 2003 when just 645,000 ounces were recycled to 2.1 million ounces last year.
However, even if the strikers do now return to work it could take as long as six months for the mining companies to ramp up their production.
Lonmin had hoped its strikers would return to work last week after taking its wage offer directly to its employees, sidestepping the Association of Mineworkers and Construction Union.
An offer of a miner’s basic monthly salary package rising to R12,500 by July 2017 has been rejected by workers who are demanding the deal takes effect immediately.
Two mine workers were killed attempting to return to work, which prompted calls for the South African Government to step in and take action to resolve the dispute and prevent violence escalating as it did two years ago when 44 mineworkers were killed and a further 78 injured in the so-called Marikana Massacre.
Lynas revenue jumps 21% as rare earth prices jump
Australian miner Lynas Rare Earths posted a 20.6% rise in revenue in the March quarter as selling prices for the key metals it mines hit record highs amid strong demand, particularly for neodymium and praseodymium (NdPr).
NdPr is used in magnets for electric vehicles and windfarms, in consumer goods like smartphones, and in military equipment such as jet engines and missile guidance systems.
The company said it plans to maintain production at 75% however, as it seeks to continue to meet covid-19 safety protocols and grapples with shipping difficulties. Shares in Lynas fell 6.1% after the results.
“They have faced a few logistics issues, and it would be good to know when they are going to start lifting their utilisation rates a bit,” said portfolio manager Andy Forster of Argo Investments in Sydney.
“Pricing has been pretty strong although it may have peeled back a bit recently. I still think the medium, long-term outlook is pretty good for their suite of products.”
Lynas post ed revenue of A$110mn ($85.37mn) for the three months to the end of March, up from A$91.2mn a year earlier as prices soared.
It said its full product range garnered average selling prices of A$35.5/kg during the March quarter, up from $23.7 in the first half of the financial year. “While the persistence of the covid crisis, especially in Europe, calls for careful forecasts for our business ahead, we see the rare earth market recovering very quickly,” said Lynas, the world’s largest rare earths producer outside China.
Freight demand has spiked during the pandemic, while the blockage of the Suez Canal in March delayed a shipment to April.
Lynas’ output of 4,463 tonnes of rare earth oxide (REO) during the quarter was marginally lower than 4,465 tonnes from a year earlier.