A new report by Metals Focus estimates that nearly one-sixth of global platinum group metals (PGM) production was loss-making last year, highlighting the persistent pressure on SA miners.
The report forecasts an annual average platinum price of $970/oz this year, up only 1% from last year, reinforcing calls for further supply cuts across the industry.
Major players in the local sector have been warning that further production cuts may be necessary this year if PGM prices do not pick up.
In its latest annual results, Sibanye Stillwater said it might close unprofitable shafts this year if prices do not recover, while Impala Platinum CEO Nico Muller has urged platinum producers to keep the doors open for further cuts.
As the world’s biggest platinum producer, SA has been bearing the brunt of the PGM price slump, particularly as the PGM sector is the largest employer in SA mining.
The local sector shed nearly 10,000 jobs last year as miners desperately cut costs and reduced their capital spending to keep output stable.
In the first half alone, Anglo American Platinum cut 3,700 jobs to reduce costs by about R5bn and Impala Platinum slashed its workforce by 4,000 workers.
Sibanye Stillwater let go of 2,600 workers at its SA PGM operations and announced towards the end of last year that it would shrink its US workforce further, cutting 200,000oz a year in US PGM production.
This year, Metals Focus expects platinum to continue to trade rangebound, supported by a 529,000oz deficit in global platinum markets, the third consecutive annual deficit.
Palladium prices are expected to fall 5% year on year as the global deficit narrows to 254,000oz, while rhodium prices are projected to rise 8% year on year as the deficit narrows to 105,000oz.
“Supply cuts since 2021 in both primary and secondary output continue to drive physical deficits across all PGM markets,” reads the report.
The growth of electric vehicles’ market share continues to weigh on the long-term demand outlook for PGMs, with total automotive demand falling for the first time since 2020 last year.
“Despite the slower pace of electrification, demand for platinum, palladium and rhodium, still tethered to the fate of the internal combustion engine, slipped by 4% in 2024,” said Metals Focus director of PGMs Wilma Swarts.
This year’s tariffs, including the 25% tariff on all US car imports, have added further risks to the demand forecast, threatening to weigh on new car sales and automotive demand for PGMs.
As prices remain under pressure, SA’s PGM producers are vulnerable to rising operating costs within the local industry.
According to the Minerals Council SA, high financing and electricity costs were the primary drivers of input cost inflation in the first quarter.
A 12.74% tariff hike for direct Eskom customers last month and sustained interest rate levels are expected to keep overall input costs elevated in the coming months, warned the council.
World Platinum Investment Council head of research Edward Sterck told Business Day that “while the PGM industry as a whole has quite successfully restructured and cut costs, embedded inflation within the mining cost structures means that for some, margins in the broader PGM mining industry remain under pressure at today’s prices”.
The price of platinum was up to $1,010.40/oz on Tuesday morning, having gained nearly 13% since the start of the year. Last year, platinum prices fell by 9.5%, following an 8% decline in 2023.
Palladium and rhodium prices have risen by 9.5% and 20.2% respectively since end-December.
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