The impact of South Africa’s energy crisis that has resulted in mining companies failing to sustain production is dimming the outlook for global platinum output.
According to the World Platinum Investment Council (WPIC), “refined mine production declined 8%” or by 96 000 ounces in the first quarter of 2023 compared to the same period last year.
Compared to the fourth quarter period demand, the global refined platinum output is down by as much as 11% or by about 151 000 ounces.
“Output in South Africa declined 14% (or by 119 000 ounces) year on year as smelter maintenance and the impact of the ongoing electricity shortages hampered output,” the WPIC said in a quarterly report released yesterday.
For South Africa, the Eskom power deficiency is casting an uncertain outlook on the global PGM industry. South African platinum miners – among them Anglo Platinum, Impala Platinum and Sibanye-Stillwater as the top producers – have been vocal about the energy crisis and are having to invest heavily into hydrogen and other power alternatives.
“These are tough times for the South African PGM industry in terms of the impact of the electricity crisis. Any solutions are long term in terms of sustainability which means for the immediate and medium-term outlook, the industry output is uncertain, unless there is a quick fix to the Eskom power supply issues,” a South African PGM industry executive, who declined to be named, told Business Report yesterday.
South African platinum mining company executives are trying to either re-schedule power-intensive production and refining processes or invest in high-voltage diesel generators.
South Africa is the world’s number one producer of the platinum group metals, followed by Zimbabwe, which has also been experiencing a power crunch, but its platinum mines have been able to sustain production as a result of their ability to pay for dedicated power imports.
Even Russia, which is battling to contain the global fallout from its invasion of Ukraine performed better compared to South Africa Nonetheless, refined production gains “from Russia failed to offset reduced output” from South Africa.
The elevated impact of South Africa’s energy crisis is, however, forecast to have a minimal impact on mined platinum output.
The WPIC said mined platinum supply is forecast to fall by a modest 1% to 5.5 million ounces this year, “as reductions in South Africa are partially offset by gains in Zimbabwe and North America.
Significant “uncertainties still exist for the South African platinum supply” though.
Trevor Raymond, CEO of the World Platinum Investment Council, said: “In Q1’23 we saw evidence of these core drivers increasing demand, with the deficit exacerbated by worsening of electricity supply shortages in major producer South Africa.”
If the current impact of electricity deficit on the PGM industry continues, South African platinum companies will likely miss out on the projected sustained demand for platinum from the automotive and industrial industries.
The WPIC said industrial demand for platinum was “on track to be the strongest on record, increasing 17% – driven by glass capacity expansions” in China.
Strong platinum automotive demand growth continues in 2023, up 12% on higher loadings and increased substitution, it said.
The stronger industrial and automotive demand for platinum group metals has been met by “a surge in physical investment” demand. This has contributed to a widening gap between the supply and demand for platinum.
The revised forecast deficit for 2023 of almost 1 million ounces informed by developments in the first quarter of 2023 is now poised to attract further investor interest in bars and coins and physically backed ETFs, the WPIC said.
Already, net platinum ETF holdings grew by 43 000 ounces during the first quarter period under review, reversing the previous six quarters’ net disinvestment, with significant renewed interest from South African funds for holding platinum ETFs in preference to PGM mining equities.
BUSINESS REPORT