Platinum supply struggles

The majority of platinum producers have now reported production for 2013. It appears that South African production is a little higher than the most recent JM estimates, although it seem likely they are also underestimated demand given decent auto activity and Chinese demand into year-end.  2014 looks set to be a little higher in the absence of any major disruptions, the risk of which is high given current wage negotiation tensions in South Africa.

Miners have been cautious in their guidance for supply for 2014 as its unclear how long the current impasse on wage negotiations will last.  For now its likely that miners have sufficient stock in pipeline to cover outages at the mine face, although with the impasse now lasting 5 weeks, these stocks will be running thin.

The big change in the outlook for 2014 is the loss of production from Anglo's Rustenburg operations with the closing and rationalisation of mine shafts. This was only a small drag on output in 2013 as a whole, but is now making a much bigger impact.

The poor production outlook for Anglo's operations should be offset by better production elsewhere.  Lonmin and Implats should see better output, both from South African and Zimbabwe based operations, while smaller miners like Platmin and Atlatsa have managed to increase output in difficult conditions.

This, however, is subject to broader challenges facing the sector from labour and wage disputes which remain ongoing.

Indeed, the gains in production in the absence of ongoing strikes and safety interventions are not very big, with the level of production still below that of 2012. Elsewhere in the world, mine supply remains largely stable. So even in a positive scenario for miners, supply is set to struggle against improving demand.