Platinum’s worst crisis in decades hits jobs in South Africa

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South Africa’s platinum producers are in crisis, as slumping metal prices force jobs cuts and erode profits.

The nation’s platinum sector — which accounts for about 70% of global output — has been a key export industry and generates jobs for hundreds of thousands of people in a country with one of the world’s highest unemployment rates.

Over the past two weeks, the four biggest producers — Sibanye Stillwater Ltd., Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Northam Platinum Ltd. — have all released sobering earnings reports. Those results have helped us learn the following:

Jobs threat

The miners are trimming their workforces in South Africa – a politically sensitive move as the ruling African National Congress prepares for its sternest electoral test later this year.

Amplats, the platinum business of Anglo American Plc, has opened discussions with labor unions that may affect 3,700 jobs. Sibanye already cut 2,600 employees and contractors following similar consultations and Implats said it shed more than 1,000 jobs in the second half of last year.

Producers of platinum-group metals – used to curb emissions from gasoline and diesel vehicles – directly employed almost 182,000 people in 2023, according to the Minerals Council of South Africa.

Shrinking profits

Just two years ago, profits were at all-time highs as automaker demand pushed the price of rhodium and palladium – mined alongside platinum in South Africa – to record levels. Since the start of 2023, the price of palladium and rhodium has tumbled 44% and 63%, respectively, hit by inventory destocking and a subdued global economy.

While the decline of platinum has been more modest, the overall collapse in the PGMs has been devastating for miners’ bottom line: full-year profit at Amplats slumped 73%, while earnings at Implats and Northam for the six months through December plunged about 90%. Sibanye reported a $2 billion loss on Tuesday.

The shares of all four companies have lost more than half their value since the beginning of last year.

Cost cutting

The producers have reacted to what Northam chief executive officer Paul Dunne describes as the “worst crisis” in three decades by cutting costs and curbing spending.

Amplats is targeting savings of 5 billion rand ($261 million), while Implats plans to cut its expenditure by more than half a billion dollars over the next five years across its operations in Canada, Zimbabwe and South Africa. Sibanye and Implats are both hobbled by high-cost palladium assets in North America, where the firms have axed an expansion project and shortened the life of a mine.

The miners are bracing for a prolonged period of pain, with CEO Dunne expecting the “depressed pricing environment” to continue for as long as two years.

Output risks

By the end of 2023, as much as half of PGM production — excluding the Russian mines that are the world’s largest source of palladium — was unprofitable, according to estimates by Rene Hochreiter, an analyst at Noah Capital Markets in Johannesburg.

While that figure improves to about 15% when metals mined alongside the PGMs, such as chrome and copper, were factored in, the situation is set to deteriorate this year. Stripping out those byproducts, up to two-thirds of output will lose money, Hochreiter said.

While expansion projects have been set aside, the biggest platinum miners have yet to announce significant production cuts. They point out that the markets for the three main metals were all in deficit last year and retain confidence in the long-term prospects for their portfolios, despite the rise of electric vehicles.

However, that may change if the current squeeze continues, according to Heraeus Precious Metals. “If PGM prices do not recover, then shaft closures may become inevitable,” the Germany-based trader and refiner said last month.

(By William Clowes)

Read More: Platinum deficit in 2024 to be deeper than expected – WPIC


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