South Africa’s platinum-mining stocks gauge fell to the lowest level in more than seven years as the spot price of the metal is set for the biggest monthly slide since May last year.
The six-member FTSE/JSE Africa Platinum Mining Index, whose members include the world’s three biggest producers, lost 2.9 percent to 35.72 by the close in Johannesburg, the lowest since Oct. 25, 2005. The measure has declined 16 percent in June. The price of platinum, used in catalytic converters that help reduce emissions from cars, has slumped 7.4 percent this month, the most since May 2012.
Labor unrest has disrupted mining in South Africa, the biggest producing nation, creating a deficit in 2012 that was the first after nine years of surplus, researcher CPM Group said yesterday. Higher costs and lower prices are prompting Anglo American Platinum Ltd., the largest miner of the metal, to consider job cuts, which the South African government opposed. Increased Japanese demand and higher jewelry sales in China were offset by a slowdown in use by European automakers.
“Prices are at the mercy of poor demand for new vehicles as well as an inelastic supply of the metal,” Ryan Wibberley, the head of equity dealing for frontier and emerging markets at Investec Asset Management, said by phone from Cape Town. “This imbalance might have been addressed by controlling output, but closure of mines is met with stiff resistance by both government and unions. With supply so hard to turn off in this country the best outlook for platinum lies in global economic recovery.”
Three workers have died in labor-union rivalry at South African platinum mines in May and June, adding to the 44 slain last year, including 34 killed by police on a single day in August.
Amplats has lost 15 percent this month, closing at 281 rand. Impala Platinum Ltd., the second-biggest miner of the metal, slumped 4.2 percent to 86 rand, extending the decline in June to 19 percent and heading for the lowest closing level in 7 1/2 years.
Lonmin Plc, the third-largest producer, has fallen 12 percent in June to 40.43 rand in Johannesburg trading while Royal Bafokeng Platinum Ltd. has slipped 6.5 percent.
Labor tension on mines spurred President Jacob Zuma to appoint his deputy, Kgalema Motlanthe, to facilitate talks between the unions, companies and government departments on wage demands and possible shaft closures.
The global platinum outlook is “very negative,” Motlanthe told Johannesburg-based Talk Radio 702 today.
Disruptions to platinum output and the subsequent loss of export earnings for the country have put pressure on the rand, the world’s worst performer against the dollar this year among 16 major currencies tracked by Bloomberg. The rand has lost 18 percent since the police killings at Lonmin’s Marikana operations on Aug. 16 and weakened 0.1 percent to 10.0831 per dollar today.