South Africa\u2019s platinum producers are in crisis as slumping metal prices force job cuts and erode profits.<\/p>\n\n\n\n
The nation\u2019s platinum sector \u2013 which accounts for about 70% of global output \u2013 has been a key export industry and generates jobs for hundreds of thousands of people in a country with one of the world\u2019s highest unemployment rates.<\/p>\n\n\n\n
Over the past two weeks, the four biggest producers \u2013 Sibanye Stillwater, Anglo American Platinum, Impala Platinum Holdings and Northam Platinum \u2013 have all released sobering earnings reports. <\/p>\n\n\n\n
Those results have helped us learn the following:<\/p>\n\n\n\n
Jobs Threat<\/strong><\/p>\n\n\n\n The miners are trimming their workforces in South Africa \u2013 a politically sensitive move as the ruling African National Congress prepares for its sternest electoral test later this year.<\/p>\n\n\n\n Amplats, the platinum business of Anglo American, has opened discussions with labour unions that may affect 3,700 jobs. <\/p>\n\n\n\n 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.<\/p>\n\n\n\n Producers of platinum-group metals \u2013 used to curb emissions from gasoline and diesel vehicles \u2013 directly employed almost 182,000 people in 2023, according to the Minerals Council of South Africa.<\/p>\n\n\n\n Shrinking Profits<\/strong><\/p>\n\n\n\n Just two years ago, profits were at all-time highs as automaker demand pushed the price of rhodium and palladium \u2013 mined alongside platinum in South Africa \u2013 to record levels. <\/p>\n\n\n\n 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.<\/p>\n\n\n\n While the decline of platinum has been more modest, the overall collapse in the PGMs has been devastating for miners\u2019 bottom line: full-year profit at Amplats slumped 73%, while earnings at Implats and Northam for the six months through December plunged about 90%. <\/p>\n\n\n\n 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.<\/p>\n\n\n\n Cost Cutting<\/strong><\/p>\n\n\n\n The producers have reacted to what Northam Chief Executive Officer Paul Dunne describes as the \u201cworst crisis\u201d in three decades by cutting costs and curbing spending.<\/p>\n\n\n\n Amplats is targeting savings of R5 billion, 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. <\/p>\n\n\n\n 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.<\/p>\n\n\n\n The miners are bracing for a prolonged period of pain, with CEO Dunne expecting the \u201cdepressed pricing environment\u201d to continue for as long as two years.<\/p>\n\n\n\n Output Risks<\/strong><\/p>\n\n\n\n By the end of 2023, as much as half of PGM production \u2013 excluding the Russian mines that are the world\u2019s largest source of palladium \u2013 was unprofitable, according to estimates by Rene Hochreiter, an analyst at Noah Capital Markets in Johannesburg. <\/p>\n\n\n\n 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. <\/p>\n\n\n\n Stripping out those byproducts, up to two-thirds of output will lose money, Hochreiter said.<\/p>\n\n\n\n While expansion projects have been set aside, the biggest platinum miners have yet to announce significant production cuts. <\/p>\n\n\n\n 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.<\/p>\n\n\n\n However, that may change if the current squeeze continues, according to Heraeus Precious Metals. \u201cIf PGM prices do not recover, then shaft closures may become inevitable,\u201d the Germany-based trader and refiner said last month.<\/p>\n\n\n\n
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