By Alex MacDonald
CAPE TOWN--The global platinum industry is forecast to produce a deficit of anywhere between 80,000 troy ounces to 760,000 ounces, said the Chief Executive of South Africa's Royal Bafokeng Platinum Ltd. I (RBP.JO), a joint venture partner with Anglo American Platinum Ltd. (AGGPY, AMS.JO).
Steve Phiri told an audience at the GMP Securities Mining Jamboree in South Africa, which accounts for some 80% of the world's platinum output, cash costs have been rising 18.1% year on year since 2007 with labor and energy being blamed as the culprits. At the same time strike action and safety stoppages coupled with the low price of platinum in rand terms have forced platinum producers to shutdown loss-making operations.
All of this has occurred against a backdrop of weak demand from European automakers who use platinum in auto catalysts to reduce vehicular emissions.
Mr. Phiri estimated about 59% of the South African platinum industry is currently either breaking even or loss making based on a platinum price of $1,600 an ounce, posing a problem for the South African economy which counts on the platinum industry for 5.5% of its gross domestic product and which employs about 190,000 people.
Mr. Murray, who is due to assume his role as chairman of Sylvania Platinum Ltd. (SAPLF, SLP.LN) in April, said he expects to see more mine closures in South Africa's UG2 reef given its poor production cost profile. "More of it has to be curtailed."
"We can ill afford this situation," he said.
Stuart Murray, the former CEO of Aquarius Platinum Ltd. (AQPTY, AQP.AU, AQP.LN), the world's fourth-largest primary platinum producer, said the South African industry lost more than 500,000 ounces of platinum last year and this year production will be about 200,000 ounces to 250,000 ounces below analysts' expectations. "Looks like 2013 will be a fundamental deficit, the first time in five years."
"You will see continued curtailment of capex...that will lead to a dampening of expansion from producers in South Africa," he added.
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