Impact of Falling Prices and Workforce Reduction
According to data from the World Platinum Investment Council (WPIC), South Africa’s platinum supply has returned to pre-pandemic levels, largely driven by significant job cuts and operational recalibrations in response to declining prices. The WPIC, which is funded by major South African platinum miners including Anglo American (LON: AAL), Northam Platinum, Sedibelo Platinum Mines, Impala Platinum Holdings (JSE: IMP), and Tharisa (JSE: THA), estimates that the global industry has shed around 10,000 jobs in the current year alone.
The report highlights how the falling prices of platinum group metals (PGMs) have significantly affected the sector, particularly in South Africa, which contributes about 70% of the world’s total production. Platinum, primarily used in automotive catalytic converters, jewelry, and a range of industrial applications, has experienced demand fluctuations due to shifts in global markets and the push towards greener technologies.
Weak prices have placed pressure on profit margins, forcing companies to reduce their workforce in order to maintain profitability. The WPIC notes that while the industry is now operating at pre-pandemic levels, the job cuts have provided only temporary relief to mining companies facing long-term challenges.
Long-Term Production Concerns
Although the reduction in workforce has given mining companies short-term cost savings, the WPIC warns of long-term risks. Reducing the labor force could potentially damage South Africa’s production capacity in the future, leading to a possible supply deficit in the global market.
Production in South Africa is expected to decline by 2% this year, bringing total output to approximately 3.9 million ounces. The WPIC has expressed concern that the current cost-cutting measures could jeopardize long-term production sustainability, urging companies to balance short-term financial relief with the need to maintain steady production levels.
The WPIC also warns that if these measures are not carefully managed, the sector could face a more severe supply crisis in the future, which would not only destabilize South Africa’s mining industry but also have far-reaching consequences for global platinum markets.
Global production, already impacted by a decrease in Russian output, is forecasted to fall by 2% this year, reaching a four-year low of 5.5 million ounces.
