Platinum Supplies Dwindle As South Africa Mining Strike Enters 7th Week

March 5th, 2014 by

no-miningThe latest rounds of mediated talks between South African platinum mining companies and striking mine workers broke down today, with the strike set to enter its seventh week. The mining companies Amplats, Implats, and Lonmin have lost nearly 7 billion rand ($654 million) since the strike began, and members of the Association of Mineworkers and Construction Union have forfeited wages of over 3 billion rand ($280 million). The work stoppage has idled 40% of global platinum production.

Union leaders had already made plans before talks broke down, for a large demonstration and march in the South African capital of Pretoria. Buses have been chartered to bring workers from surrounding mining towns. AMCU estimates that up to 40,000 people will participate in the march. Over 70,000 union workers are striking.

At the heart of the matter is the union’s demand that entry-level wages more than double, with commensurate raises for other pay grades. The mining companies reply that workers already receive higher wages than similar workers in other industries, and that AMCU’s wage demands are impossible in a sector where over 40% of shafts are already marginal or actually operating at a loss. Despite losing money last year, the companies have offered to increase pay in three annual steps, starting with a 9% raise and ending with a 7.5% raise.

mine shaftStrains are showing on both sides, neither of which expected the other to hold out this long. The companies had stockpiled six to eight weeks of platinum ore above ground ahead of the strikes, but that supply seems to be running out. Implats has declared force majeure on delivery contracts due after the end of the month, due to the protracted strike. The other two mines are considered close to that point. This has caused the platinum spot price to finally react to the facts on the ground.

On the union side, workers, who on the average have ten mouths to feed, have missed their first monthly paycheck with no way to recoup the loss. This has forced many to return to their homes in eastern South Africa to work as farmhands in bringing in the harvest, or other menial jobs. Rumors have started of a breakaway union starting to form within AMCU’s ranks, from workers willing to accept the current offer.

If anything positive can be said to have come from the talks, it is that AMCU has amended their demands for the first time. While still demanding entry level wages more than double, union leaders say that they will let the companies split the raise up into three annual installments, and will freeze demands for additional increases in housing allowances. The industry rejected the offer, noting that it worked out to annual raises of between 30% and 40% a year for three years. The inflation rate in South Africa is 5.4%. The CEO of Implats noted that the industry offer would raise labor costs by 2 billion rand this year, in a market where the companies posted cash losses of 4.3 billion rand.

The strike has been marred by vandalism and violence, with workers not belonging to AMCU attacked and severely beaten on their way to work. Some of the victims have died from their injuries. Other deaths have occurred in violent clashes with police, where striking workers attempted to vandalize equipment and prevent other workers from entering the mines. South African president Jacob Zuma spoke about the violence in a recent visit to the strike-torn area, saying “Once the workers were on strike, instead of striking and dealing with the issues, they armed themselves with dangerous weapons. We think we need to be very emphatic to everybody that there should be no strike, no protest with people armed with dangerous weapons, that’s where we should stop it.” Zuma also laid some blame on the unrest on un-met promises from the mining corporations to improve the lives of workers in the surrounding villages.

The South African government has forcefully denied mining sector requests to be allowed to close non-performing mines and to reduce their workforce, with some officials threatening nationalization of all platinum mines. South African mines have the highest labor costs in the world, due to antiquated mining techniques and mandated employment levels. Some companies are experimenting with mechanizing the mining process, as they have done in other nations, but face resistance from the unions and government.

 

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