Rand must weaken to spur platinum supply

JOHANNESBURG – The rand would have to weaken further to spur more supply of platinum in South Africa, the world’s biggest producer of the precious metal, major producer Implats told the Reuters Mining Summit in New York on Thursday.

Anglo American Platinum, the top ranking producer in the sector, has repeatedly scaled down its growth targets in recent years due to a blistering rally in the rand over the past three years which has slashed export income from the dollar-denominated metal and made some projects unprofitable. Over the last few months South Africa’s rand has weakened by 10 per cent to 15 per cent against the dollar, but this is not enough to convince mining producers to revive projects put on ice, Implats Chief Executive Keith Rumble told the summit, held at Reuters New York headquarters.He was speaking by telephone from South Africa.The rand was trading at 6,81 against the dollar on Thursday afternoon.South Africa accounts for around three-quarters of world platinum supply and worries about cutbacks in growth plans there have helped to fuel price rises in the metal in recent years.When asked what it would take to stimulate new supply, Rumble answered: “I’d suggest that if the rand weakens to a point of 7,5-8,0 rand (against the dollar), I think it would.I think it’s still too early at this point of time to say that would happen, I think it (the rand) needs to run somewhat.”The weaker rand was mainly a function of a stronger dollar and it was unclear whether the US currency had bottomed out, Rumble said.”If it is a bottoming out of the dollar, then sentiment could change once we have the confidence that is the primary driver.”The weakening rand has also been helped by a change in policy by the South African government, which in recent months has said it was taking into consideration the strong currency in making monetary policy.Any move to expand supply due to the rand, however, did not concern Implats, the global number two producer, which has never delayed any projects due to the stronger rand, Rumble added.Implats has taken the view that a lack of supply would boost the dollar price of platinum, mainly used in jewellery and auto catalysts to clean exhaust fumes, balancing the negative effects of the buoyant rand, he said.Rumble said he agreed with most analysts that the global platinum market would move into a slight surplus this year after several years of being in deficit.A moderate surplus would last for two to three years, after which the market is expected to move back into deficit due to increased demand from diesel vehicles and stricter environmental regulations.-Nampa-ReutersOver the last few months South Africa’s rand has weakened by 10 per cent to 15 per cent against the dollar, but this is not enough to convince mining producers to revive projects put on ice, Implats Chief Executive Keith Rumble told the summit, held at Reuters New York headquarters.He was speaking by telephone from South Africa.The rand was trading at 6,81 against the dollar on Thursday afternoon.South Africa accounts for around three-quarters of world platinum supply and worries about cutbacks in growth plans there have helped to fuel price rises in the metal in recent years.When asked what it would take to stimulate new supply, Rumble answered: “I’d suggest that if the rand weakens to a point of 7,5-8,0 rand (against the dollar), I think it would.I think it’s still too early at this point of time to say that would happen, I think it (the rand) needs to run somewhat.”The weaker rand was mainly a function of a stronger dollar and it was unclear whether the US currency had bottomed out, Rumble said.”If it is a bottoming out of the dollar, then sentiment could change once we have the confidence that is the primary driver.”The weakening rand has also been helped by a change in policy by the South African government, which in recent months has said it was taking into consideration the strong currency in making monetary policy.Any move to expand supply due to the rand, however, did not concern Implats, the global number two producer, which has never delayed any projects due to the stronger rand, Rumble added.Implats has taken the view that a lack of supply would boost the dollar price of platinum, mainly used in jewellery and auto catalysts to clean exhaust fumes, balancing the negative effects of the buoyant rand, he said.Rumble said he agreed with most analysts that the global platinum market would move into a slight surplus this year after several years of being in deficit.A moderate surplus would last for two to three years, after which the market is expected to move back into deficit due to increased demand from diesel vehicles and stricter environmental regulations.-Nampa-Reuters