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More Mining Industry Struggles Coming In South Africa

Mongolia Chinas Reach Arms LengthSouth Africa is the largest producer of platinum, the precious metal that is used in hard disks and cars. The mines in the country provide 3/4 of the global supply. However, due to lackluster platinum prices, lower demand, frequent worker strikes, and increasing mining costs, the mining industry in South Africa might fail to meet the worldwide demand of platinum.

Platinum Need and Production Decreasing

Even though supply might not meet demand in 2013, prices are not expected to increase, which is what usually happens if a product has high demand and low supply. This is because the global economy is still sluggish. Higher platinum prices won’t be attractive to buyers who are already struggling financially.

Platinum is used in hard disks and automotive parts. Tablet devices, which have become extremely popular world-wide, do not use hard disks. This means that the demand for platinum has lowered. The lower demand of the precious metal is exacerbated by the low number of car purchases in Europe.

The top mining companies in South Africa, which include Anglo American Platinum, Lonmin, Impala Platinum, and Aquarius Platinum, are all expected to produce less of the precious metal this year. Production is predicted to be the lowest in over a decade.

Mining Strikes Affecting the Industry

All these problems would be enough to seriously impact the mining industry in South Africa, but the ongoing mine worker strikes are making the situation even more dire. In August, there was a large workers strike at one of Lonmin’s mines that ended in bloodshed, with 34 striking workers shot to death. Since then, there have been wildcat strikes in various mines all over the country. This state of affairs is not limited to platinum mines; various mines that produce other metals are also dealing with illegally striking workers.

Another negative effect of the mine strikes is the harm being done to South Africa’s image. This could result in less interest from investors and multinationals, who might turn elsewhere to other African nations that are anticipated to have faster growth in subsequent years.

Wildcat strikes slow down production, but they also drive up mining costs for the mining houses. The combination of rising production costs and lower demand without price increases is putting a financial strain on the biggest of the mining houses in South Africa.

Platinum Sales Dropping this Year

In all, the total of platinum sales in South Africa in 2013 is forecasted to drop by 12.5 percent. The demand of platinum worldwide fell 0.6 percent, bringing down the total to 8.1m ounces. Production was down by 16 percent, making the total of platinum production only 4.1m ounces that year. There was a deficit of 375,000 ounces in 2012 and the same amount is expected to be seen in 2013.

The struggles experienced by the mining industry in South Africa has had a significant impact on the economy of the country. The South Africa’s Reserve Bank has lowered its growth forecasts from 2.7 per cent to 2.4 per cent. This is a serious issue for a country that has high levels of unemployment.

Time will tell whether the mining industry will see a better year in 2014 and beyond.

About the Author

This article was written by Nicole. She writes about the mining industry. She recommends this company for high quality mining pumps.

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Author:Globial International Business Team

The Globial International Business Team researches, analyzes, and reports on all things related to global trade and business.


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