Bloomberg reports on the looming platinum shortage, quoting Barclays as estimating that supply may drop to a 13-year low due to platinum mines being mothballed in South Africa. Mining companies are shuttering mines as the cost to extract and process the ore is nearly the same as the market price. Anglo American Platinum (Amplats) announced in December that it would put four platinum shafts in maintenance mode due to market conditions, and lay off 14,000 workers, sparking outrage on the part of South Africa miners and government officials.
The closure of the four Amplats shafts will drop global production by 400,000 ounces. Last year, platinum supply was 394,000 ounces less than demand, but the shortage did little to raise prices. Kitco News reported on the state-run electrical company of South Africa requesting permission to raise prices 16% a year for the next five years, which, on top of wage demands by miners, would push more mining operations over the brink into unprofitability. Amplats posted its first ever annual loss in 2012 due to violent labor strikes in South Africa and low market prices for platinum, suspending dividend payments (Fox Business News ).
Some analysts are unsure a further restriction of platinum supply will raise prices sufficiently, unless demand picks up. Hopes for that are pinned to the U.S. and Chinese economy, as the Eurozone still struggles with insolvency and high unemployment in its southern members. One ray of hope is U.S. auto sales, which posted a 14% increase in January compared to a year ago. Reuters notes increased platinum purchases by fund managers in recent days, and that platinum exports from refiners in Switzerland, a major refining and trading hub for platinum, tripled in 2012.