Impala Platinum (Implats) expects the outlook for platinum group metals (PGMs) to remain challenging in the short term, especially as lower prices persist, forcing South Africa miners of the precious metal to cut costs, close non-profitable shafts and limit fresh investment.
According to the World Platinum Investment Council, South African (PGM) producers will influence global refined supply which is expected to firm up by 1% next year. This comes at a time Implats and Northam Platinum among others are holding excess inventory.
This year, world platinum supply will grow to 7.3 million ounces, with refined mine supply likely “depend heavily on the volume of semi-finished inventory that South African producers” are able to release. However, such measures have not translated to a marked improvement in platinum prices and Implats believes that the near-term outlook will be less rosy.
“Our expectation is that the physical market will improve further over time with an improved macro outlook, ongoing supply responses and a more pragmatic auto electrification outlook. However, the near term could remain bumpy for some time,” Johan Theron, the spokesperson for Implats told Business Report by email.
As at the 2024 third quarter, Implats was holding 230 000 ounces of inventory while Northam had about 60 000 ounces. Implats and Northam estimate that it may take up to three years to fully release this inventory although the rate of release for 2025 is expected to play a significant role in shaping global mine supply levels.
The subdued PGM prices on world markets have coincided with other challenges that SA producers are encountering. These “significant challenges” are with respect to “a challenging macro-economic reality” as well as rising mine costs such as electricity tariffs.
“The (SA PGM) industry has taken significant action over the past year to account for this, including cost/capital curtailment, large scale labour restructuring and portfolio prioritisation,” explained Theron.
While input cost inflation stabilised in 2024 for South Africa, the persistently low PGM prices continue to challenge higher-cost producers. Due to the low PGM pricing, major projects originally scheduled to contribute production, such as the Two Rivers Merensky project and the Platreef project, have been deferred or placed on care and maintenance.
Despite waning inflationary pressures, cost-cutting measures are being implemented across the local PGM sector, with around 9 000 jobs eliminated so far.
The WIPC says that at current PGM prices, the profitability of several South African operations remains marginal, amid heightened price sensitivity. Worse still, should PGM prices decline further, additional restructuring may become necessary, posing a downside risk to the 2025 mine supply forecasts.
BUSINESS REPORT