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South Africa’s PGM production plummets

By · April 12, 2012 · 9:36 am · Leave a Comment

 

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By Peter Koven

South Africa produces three quarters of the world’s platinum, and is also the second largest producer of palladium (known together as the platinum group metals, or PGMs). So production fluctuations in the African nation can have an enormous impact on global supply.

That seems to be happening right now.

According to statistics out of South Africa, PGM production in the country plummeted 48% in February 2012 compared to February 2011. That follows a 33% drop in January. The key factor was worker unrest, particularly at the Rustenburg operations of Impala Platinum Holdings Ltd.

BMO Capital Markets analyst Edward Sterck noted that the strike reached a conclusion, but the operation has yet to reach full-scale production.

“Such a decline in production from South Africa has a material impact on the global supply/demand balance, which could be positive for near-term PGM prices. However, higher prices may be offset by continued cost inflation and production shortfalls experienced by most of the PGM producers,” Mr. Sterck wrote in a note.

He added that Aquarius Platinum PLC may be best positioned to capitalize on any rise in PGM prices, but concerns about the company’s Zimbabwe exposure are an overhang on the stock.

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