SA platinum supply seen falling 2% this year

The World Platinum Investment Council has projected that the capital and production cuts by South African PGM miners will have an impact on the country’s platinum supply. Photo: Supplied

South Africa’s platinum supply to world markets is projected to fall by 2% this year hammered by shaft closures, reduced investment, and lay-offs.

The World Platinum Investment Council (WPIC) yesterday said that this would affect ramp-up output from some expansion projects.

With the world’s largest platinum reserves, South Africa’s platinum group metals (PGM) sector has largely struggled for viability and profitability in the past few months.

Continuously depressed PGM prices have had a toll on the industry, with Sibanye-Stillwater recording a $2.58 billion (R47.5bn) loss for 2023.

Impala Platinum is also considering shutting some shafts after half-year profits for the period to end December, 2023, slumped to R1.7bn compared to R14.8bn a year earlier.

Now the WPIC has projected that the capital and production cuts by South African PGM miners will have an impact on the country’s platinum supply.

“South African supply is projected to decline by 2% due to cost-driven infrastructure closures offsetting increases from some expansion projects,” the WPIC said in its quarterly report published yesterday for the first quarter of 2024.

It also said platinum output from Russia was set to decrease significantly by 9% to a multi-decade low due to planned maintenance and the impact of Western sanctions on business operations in that country.

Nonetheless, refined mine production rose 4% year on year in the quarter to end March, 2024, to 1.2 million ounces.

This rebound was driven primarily by a 5% year-on-year rise in South African production, while there was also a 5% increase in output from Zimbabwe – where Implats, Sibanye-Stillwater and Anglo American Platinum also have operations.

Despite this, WPIC CEO Trevor Raymond said world platinum production for the 2024 full-year has been projected to slump by 2% to 5.4 million ounces.

“Continuing challenges present downside risks to supply into next year, not least as miners look to reassess production plans and restructure operations to manage the negative impact of the significant decrease in the PGM basket price on mining profitability,” Raymond said.

He added that the effects of the ongoing supply rationalisation plans will have a short-term downside effect as well as severely constraining any near-term supply response to demand growth or higher platinum prices.

In the March quarter under review, “platinum supply was the second lowest in our time series, with full-year 2024 also forecast to be a near-record” low.

This comes as above-ground stocks are forecast to decline for the second year in succession amid a further 12% decline to 3.6 million ounces hitting a four-year low.

Global demand for the precious metal rose to nearly 2 million ounces quarter on quarter as a consequence of an upswing in jewellery demand, which added to steady demand growth from the automotive sector.

The WPIC has projected demand for platinum at 7.5 million ounces, resulting in a market deficit of 476 000 ounces, marking the second consecutive annual deficit for the metal.

Automotive platinum demand in 2024 is expected to grow by 2% to 3.2 million ounces due to slowing consumer demand for battery electric vehicles (BEVs), and the continuation of growth in both heavy-duty and hybrid vehicle numbers.

Stricter emissions legislation and an increase in platinum-for-palladium substitution, which is forecast to reach 742 000 ounces this year are also among contributory factors.

“We are now seeing signs that platinum’s role in the hydrogen economy is gaining momentum, with our forecast for 2024 indicating a significant increase in demand to meaningful levels,” Raymond said.

This year, there is likely to be allocation and deployment of over $300bn in tax incentives and subsidies from governments around the world, a factor that is likely to further accelerate demand for hydrogen worldwide.

“Gradually this trend is capturing global investor interest and offering investors a way to engage with assets associated with global decarbonisation,” he said.

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