South Africa’s Platinum Mining Industry Faces Irreversible Decline Amid Falling Prices and EV Growth
South Africa’s platinum mining industry is entering a phase of irreversible decline as producers grapple with low metal prices and dwindling demand due to the rise of battery electric vehicles (EVs), according to Northam Platinum CEO Paul Dunne.
Dunne’s remarks on Friday underscored the significant challenges facing the industry, which has long been a cornerstone of South Africa’s economy.
Platinum prices, which once soared above $2,000 an ounce, have plummeted 13% since the start of last year, currently trading at around $939 an ounce. This decline has heavily impacted platinum producers like Northam Platinum, whose headline earnings per share dropped 81.6% for the year ending in June, from 24.15 rand to just 4.45 rand ($0.25).
The struggles extend beyond platinum. Palladium, a sister metal, saw its price fall by 40% in 2023 and has continued to decline by 10% this year. Rhodium, another related metal, is now trading at approximately $4,750 an ounce, a stark contrast to its 2021 peak of nearly $30,000 an ounce.
Shares in Northam Platinum, South Africa’s fourth-largest platinum miner, fell 8.2% on Friday as the market reacted to these grim figures.
South Africa, the world’s largest supplier of platinum, has seen its output steadily decline since peaking at around 5.3 million ounces in 2006. Current production stands at approximately 3.9 million ounces, but Dunne predicts this will drop by around 10% over the next five years, reaching about 3.5 million ounces.
Despite these challenges, Northam aims to stabilize its production at around 1 million ounces annually, up from just under 900,000 ounces produced in the year to June 30. The company has been ramping up operations at its Eland mine, acquired in 2017.
Dunne attributed the broader industry decline to years of under-investment in new mines, compounded by the growing market share of battery-powered vehicles, which require fewer platinum-based components. “We haven’t replaced that asset base, and the asset base is a depleting asset,” Dunne said, warning that South Africa’s aging mining infrastructure will further accelerate the sector’s decline.
Industry experts estimate that platinum output could drop by 500,000 ounces every five years as investors shy away from funding new mining ventures. This decline mirrors the trajectory of South Africa’s gold mining industry, which was once the world’s largest but now ranks 12th globally.
Impala Platinum CEO Nico Muller echoed Dunne’s concerns, stating that it is “highly improbable” new mines will be developed in South Africa given the current low metal prices and high operational costs. South Africa’s platinum mines, some of the deepest in the world, are also among the most costly to operate due to their lack of mechanization.
As the industry continues to struggle, the fate of more than 181,000 workers directly employed by South Africa’s platinum mines hangs in the balance, raising concerns about the broader economic impact of this decline on the country.
Source: https://www.thezimbabwemail.com/