#2. Inventories Are Near the Bottom of the Barrel
One reason platinum price moves have been muted during the work stoppage is because there have been adequate stockpiles. But those are getting low.
Impala, the world’s second-largest platinum producer, said the company is now supplying customers from its inventories.
In March, Switzerland’s platinum imports from strike-hit South Africa plummeted to their lowest level in five-and-a-half years, according to the Swiss customs bureau.
Since producers can’t currently meet demand, some customers are now obtaining metal from other sources, including buying it in the open market.
As inventories decline, supply from producing companies will need to make up the shortfall—and they’ll have little ability to do that.
#3. The Strikes Will Make Recovery Difficult and Prolonged
Companies are already strategizing how to deal with the fallout from the worst work stoppage since the end of apartheid in 1994…
- Amplats said it might sell its struggling Rustenburg operations. Even if it finds a buyer, the new operator will inherit the same problems.
- Impala said that even if the strike ends soon, its operations will remain closed until at least the second half of the year.
- Some companies have announced they may shut down individual shafts. This causes a future problem because some of these mines are a couple of miles deep and would require a lot of money to bring back online—which they may balk at doing with costs already so high.
- It’s not being advertised, but a worker settlement will almost certainly result in layoffs since some form of restructuring will be required. This could trigger renewed strikes and set in motion a vicious cycle that further degrades production and makes labor issues insurmountable.