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Platinum Overtakes Gold As South African Mining Problems Return

Tyler Durden's picture




 

In some ways it is lucky that the platinum coin nonsense is dead and buried because there may have been certain procurement issues. The reason, as was the case late in 2012, is that the South African mining situation is once again rapidly unraveling, despite hopes by third parties that recent wage compromises between employers and unions had managed to leave striking workers and mining companies at a tense but cordial  impasse. However, as was easily predictable, following the substantial wage hike demanded by miners to end strikes, what resulted was perfectly expected: a collapse in profits. And now Anglo American Platinum has no choice but to shutter a variety of facilities and fire workers outright in order to restore the pre-riot profitability.

From AP: "The world's largest platinum producer said Tuesday it will close some operations, sell one mine in South Africa and cut 14,000 jobs. Anglo American Platinum said a nearly yearlong review found that four mine shafts needed to be closed and one mine sold because of unprofitable operations. The government's minister of mines and the National Union of Mineworkers, NUM, expressed surprise and shock at the announcement." 

Sadly, "surprise" and "shock" are not leverageable bargaining positions, especially when dealing with a company hell bent on protecting the only thing that matters - profits - and unless the union is willing to retract all of its hard won wage gains achieved after nearly a month-long strike, and many workers deaths as hostilities escalated on numerous occasions, then the number of employees at the platinum miner will be drastically cut, and with it the amount of platinum produced, which is also the reason why today for the first time in nearly a year the price of Platinum and Gold reached parity once more. Is there perhaps a loophole for a #trilliondollargoldcoin that the Treasury and the Fed have not rejected yet?

More from AP on South Africa's once again very angry unions:

"The NUM will engage the company in a bid to save these jobs and appeals on workers to work together to safeguard their own jobs," said NUM general secretary Frans Baleni."

 

A Twitter posting from NUM was less diplomatic, saying the union has repeatedly called on workers to unite and defeat the evil nature of capitalism, which seeks to put profits first and humanity last.

 

The labor unrest spread in South Africa, and Anglo American Platinum, known locally as Amplats, saw a more than eight-week strike that crippled the giant at its operation in Rustenburg, about 100 kilometers (60 miles) northwest of Johannesburg. The company had fired 12,000 workers and then agreed to reinstate them in October, though the miners did not return to work until November.

 

Amplats on Tuesday said that 13,000 of the jobs it wants to cut are in the Rustenburg region.

 

Anglo American Platinum said it takes its social responsibilities to its laid-off workforce seriously and would try to create 14,000 new jobs focused on housing, infrastructure and small business development.

Jobs which, it goes without saying, will pay far, far less.

"The platinum business has attractive underlying fundamentals, but we are facing tough decisions to restore profitability to our operations. We must evolve to align the business with our expectations of the platinum market's long-term dynamics and address the structural changes that have eroded profitability over time," said Chris Griffith, Anglo American Platinum's chief executive.

 

The mining industry is a huge part of the economy in South Africa, which is the world's largest producer of platinum, gold and chromium. Most mine workers who carry out manual labor are black. The South African Institute of Race Relations says that the unemployment rate for black South Africans was nearly 41 percent in 2012, while the corresponding rate for white South Africans was 7.5 percent.

And with one of the three metals  down, and platinum prices soaring, how long until other miners are forced to restore profitability by cutting overhead, and in the process trimming production, which benefits nobody - neither management, nor employees, nor shareholders (for Hugh Hendry's thoughts on owning miners, see previously), except for the underlying metal of course, which will just get more valuable as less of it is created.

For an example of the inverse: please sell central banking and paper money.

 

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Tue, 01/15/2013 - 19:55 | 3155963 DoChenRollingBearing
DoChenRollingBearing's picture

And that is one of the little news items today...

"Big News & Little News"

http://tinyurl.com/a63ucbb

Tue, 01/15/2013 - 19:58 | 3155970 DoChenRollingBearing
DoChenRollingBearing's picture

Also I have been reading reports that the automotive industry is coming back (esp. in China), the automotive industry is by far the biggest user of Pt.  Pt is also used a catalyst in many other processes, so if it is true that the world economies are coming back, then Pt use should be expected to go up.

And, as Tyler mentioned, with production problems in S. Africa...

Tue, 01/15/2013 - 22:02 | 3156284 Northern Lights
Northern Lights's picture

I'm not too sure this spurt by Platinum will last very long.  With the economy going deeper into the dumps and Fiat/Chryslers Sergio Marchionne stating that they'll have to close some plants in Europe due to stagnant sales, not too many cars will be built and even less will be sold.

Probably the reason why they're closing those mines in the first place.  There's just not gonna be a need for much of this stuff.

Expect to see more people owning their cars longer than 5 years.  Even 10 maybe.

Tue, 01/15/2013 - 22:33 | 3156366 DoChenRollingBearing
DoChenRollingBearing's picture

So far you have made an excellent call!  Pt is down a bit vs. Au up a bit (9:30 PM US ET), gold is now again on top.

Because I am not an expert on the automotive industry I cannot comment on future quantities of cars to be sold worldwide, although I would certainly accept your take on EUROPE making and selling fewer.  PERU is a different story, plenty (by their standards) of new car buying, but they ALSO keep THEIR cars 10 years.  20 even.  Even 30 maybe.  

:)

Tue, 01/15/2013 - 23:27 | 3156527 smlbizman
smlbizman's picture

i think the purchaser's of the vehicles is were the problem is. ...we print cars also...

Tue, 01/15/2013 - 23:37 | 3156557 Northern Lights
Northern Lights's picture

Yes, not too many people buy and pay-off a car with saved monies.  Most put down 5% saved monies and get a GMAC loan on the rest.

 

Wed, 01/16/2013 - 01:18 | 3156782 Jack Napier
Jack Napier's picture

Saw a headline on Bloomberg news today when I was on my hamster wheel saying Ford is expecting a 5% increase in car purchases in 2013. Didn't say what it was based on, probably hopium.

Wed, 01/16/2013 - 02:10 | 3156844 Harlequin001
Harlequin001's picture

At the end of the day there is only capital and the return on it.

Striking miners of the world will ralise that when there is no return on capital there is no job.

Period.

Socialism and welfare can go hang.

Wed, 01/16/2013 - 02:44 | 3156869 glenlloyd
glenlloyd's picture

Average age of vehicles in the US has been climbing, and I expect it to climb further. Seems last figure I saw was over 11 years now? Also somewhere I read that delinquency rates on auto loans had ticked up.

It would be interesting to see the granular data for cars sold in 2012. How much was borrowed and for what length of time and what delinquency rates on those new auto loans is right now and what incentives for those vehicles were...both regular and sub-prime. Unfortunately the people that gather that data want some serious subscription monies to look at it.

The other side of this is that a new car no longer impresses people like it used to now that everyone (and I mean everyone) can borrow to sit behind the wheel of just about anything. I expect that the percentage of vehicles sold in 2012 with loans is pretty high....there isn't a lot of cash car buying anymore.

Technically a high dollar vehicle is worthless (illiquid) if you won't give someone a loan to buy it. If you won't loan people money to buy it your market for sales shrinks dramatically as well.

Tue, 01/15/2013 - 22:37 | 3156377 andrewp111
andrewp111's picture

Catalytic converters die even if you keep the car. Nissan only warrants the converter for 80K miles. Mine went at 86K.

Tue, 01/15/2013 - 23:35 | 3156550 Northern Lights
Northern Lights's picture

Yeah, but the point I'm trying to make is, they used to make 2 catalytic converters.  One for the new car being built at the factory and one for the used car owner who needed to replace his broke-down cat on his 5 year old car.

After the factory shutdowns and slow down in sales, they'll only be selling the catalytic converter to the guy with the 5 year old car.

Right there you've reduced your demand for platinum by 50%.  That's a lot!

Tue, 01/15/2013 - 22:41 | 3156390 akak
akak's picture

From the article above:

The mining industry is a huge part of the economy in South Africa, which is the world's largest producer of platinum, gold and chromium

Um, hey guys, it is no longer 1980 --- South Africa was long ago superseded as #1 gold producer by China.

Wed, 01/16/2013 - 01:25 | 3156794 Antifaschistische
Antifaschistische's picture

...yes, industrial demand will wane, but is this Peak Platinum?

Will China turn to more catalyst to reign in smog?

Wed, 01/16/2013 - 07:03 | 3157004 Tegrat
Tegrat's picture

Unobtainium bitches!

 

Tue, 01/15/2013 - 19:56 | 3155964 A Lunatic
A Lunatic's picture

Looks like Platinum is shooting toward a trillion dollars an ounce........

Wed, 01/16/2013 - 02:03 | 3156838 TPTB_r_TBTF
TPTB_r_TBTF's picture

... with Gold parity. 

 

The Silver Bugs will have to settle for mere Billions.

Tue, 01/15/2013 - 19:58 | 3155968 stant
stant's picture

when the trillon dollar coin came up i found 20 gold and platinum us quarters on ebay 16 bucks. to remind me of the insane time we live in. that might play out better than i thought

Tue, 01/15/2013 - 23:25 | 3156517 are we there yet
are we there yet's picture

Be sure those $16 dollar gold coins on eBay do not contain chocolate.

Tue, 01/15/2013 - 19:59 | 3155971 Cognitive Dissonance
Cognitive Dissonance's picture

"And with one of the three metals  down, and platinum prices soaring......."

Platinum prices still have a long way to go to fully back those Turbo Tax Timmy Trillion dollar coins.

Tue, 01/15/2013 - 20:02 | 3155979 knukles
knukles's picture

Uncle Warren is a Big Owner of Platinum.

Tue, 01/15/2013 - 20:04 | 3155988 silverserfer
silverserfer's picture

gutter metal:)

Tue, 01/15/2013 - 20:07 | 3155997 moonstears
moonstears's picture

That's not news, Lance Armstrong doped, and he's gonna tell it on Oprah's network. Barbarous relics.(Oprah and Armstrong, that is)

Tue, 01/15/2013 - 22:42 | 3156007 francis_sawyer
francis_sawyer's picture

Joobux ~ the ubiquitous 'enzymatic molecules'... they make it ALL happen...

~~~

Edit: [Oooh look ~ TYLERS's... multiple JUNKS there]... My hypothesis is that ZH has finally reached such a large audience that 'ALTERNATIVE MOLECULAR SCIENTISTS' have populated the threads... They haven't done much in the realm of presenting 'competing scientific theory' [probably because they're DEEPLY involved with scientific research which will bring about global equanimity], but my guess is that if you publish more threads featuring BILL NYE THE SCIENCE GUY [together with Thomas Dolby soundtracks], they'd be FANS 4 LIFE... Just tryin' 2 help a nigga out here...

Wed, 01/16/2013 - 06:48 | 3157000 Poetic injustice
Poetic injustice's picture

If I could block you instead of just -1, I would it this instant.

Tue, 01/15/2013 - 20:20 | 3156025 robertocarlos
robertocarlos's picture

Should they be stamped with IN GOD WE TRUST or IN GOLD WE TRUST? 

Tue, 01/15/2013 - 22:33 | 3156365 francis_sawyer
francis_sawyer's picture

ZOD ~ 'kneel before him'

~~~

http://www.youtube.com/watch?v=UKDFop0aqYQ

Tue, 01/15/2013 - 20:25 | 3156033 BooMushroom
BooMushroom's picture

Funny how the workers decry profits, while striking to receive a bigger profit for themselves.

Funny how shocked people are when the things that have always happened, happen again.

Tue, 01/15/2013 - 20:28 | 3156048 ruffian
ruffian's picture

IMHO, not alot to do with mining issues. Central issue is that TPTB do not care about platinum, therefore it is not capped and managed as gold is.

Tue, 01/15/2013 - 21:02 | 3156132 Spitzer
Spitzer's picture

agee on that 

Tue, 01/15/2013 - 20:36 | 3156070 Spitzer
Spitzer's picture

Not a platiunum fan. It has the same stock to flow ratio as pork bellies or wheat. Its not a monetary metal, never will be.

Tue, 01/15/2013 - 21:20 | 3156182 Bay of Pigs
Bay of Pigs's picture

You're talking crazy dude. Pork bellies and wheat? LOL...

Shutting mines down cuts the available supply. That means shortages and soaring prices.

Tue, 01/15/2013 - 20:58 | 3156119 silverserfer
silverserfer's picture

did any one like how  the PMs were used in "Looper"? Used beacuse of the time travel thing but also used by organized crime. What were they insinuating by that I Wonder?

Tue, 01/15/2013 - 21:20 | 3156183 ClassicCommodity
ClassicCommodity's picture

One day Platinum is gonna be Gold's little bitch, bending down and taking it from behind from the great big shiny, lustrous metal of kings. Enjoy your time at the top for now, Platinum.

Tue, 01/15/2013 - 21:32 | 3156210 Flakmeister
Flakmeister's picture

Projecting your sexual fantasies???

Tue, 01/15/2013 - 23:06 | 3156467 CPL
Tue, 01/15/2013 - 22:15 | 3156315 mt paul
mt paul's picture

rhodium ...

Tue, 01/15/2013 - 22:34 | 3156367 blindman
blindman's picture

pt-78, au-79.
http://www.lenntech.com/periodic/periodic-chart.htm
.
http://en.wikipedia.org/wiki/Platinum
"..
Prototype International Meter bar
From 1889 to 1960, the meter was defined as the length of a platinum-iridium (90:10) alloy bar, known as the International Prototype Meter bar. The previous bar was made of platinum in 1799. The International Prototype Kilogram remains defined by a cylinder of the same platinum-iridium alloy made in 1879.[47]

The standard hydrogen electrode also uses a platinized platinum electrode due to its corrosion resistance, and other attributes.[48]

Precious metal
Platinum Eagle
Main articles: Platinum as an investment and Platinum coin
Platinum is a precious metal commodity; its bullion has the ISO currency code of XPT. Coins, bars, and ingots are traded or collected. Platinum finds use in jewelry, usually as a 90–95% alloy, due to its inertness and shine. Jewelry trade publications advise jewelers to present minute surface scratches (which they term patina) as a desirable feature.[49][50]

In watchmaking, Vacheron Constantin, Patek Philippe, Rolex, Breitling, and other companies use platinum for producing their limited edition watch series. Watchmakers appreciate the unique properties of platinum, as it neither tarnishes nor wears out (relative to gold).[51]
Average price of platinum from 1992 to 2012 in US$ per troy ounce (~$20/g)[52]
The price of platinum, like other industrial commodities, is more volatile than that of gold. In 2008, the price of platinum dropped from $2,252 to $774 per oz,[53] a loss of nearly 2/3 of its value. By contrast, the price of gold dropped from ~$1,000 to ~$700/oz during the same time frame, a loss of only 1/3 of its value.

During periods of sustained economic stability and growth, the price of platinum tends to be as much as twice the price of gold, whereas during periods of economic uncertainty,[54] the price of platinum tends to decrease due to reduced industrial demand, falling below the price of gold. Gold prices are more stable in slow economic times, as gold is considered a safe haven and gold demand is not driven by industrial uses. In the 18th century, platinum's rarity made King Louis XV of France declare it the only metal fit for a king.[55]
Other uses
In the laboratory, platinum wire is used for electrodes;
..."
.

Tue, 01/15/2013 - 22:35 | 3156371 Tom Green Swedish
Tom Green Swedish's picture

No Gold Standard Not Platinum silver or any other PM standards.  Ron Paul says get onthe gold train .

 

http://www.youtube.com/watch?v=igQlbesF0zA&list=UU67f2Qf7FYhtoUIF4Sf29cA

Wed, 01/16/2013 - 01:16 | 3156774 Kreditanstalt
Kreditanstalt's picture

Sounds rather socialist.

Maybe the "low" wages and "poor working conditions" in the mining industry have something to do with a surplus of unskilled labour in a large, poor economy?

And..."...a company hell bent on protecting the only thing that matters - profits..."??   Profits??  You mean those EVIL profits?  Isn't that why capital is put at risk, work done and effort expended in the first place??? 

Wed, 01/16/2013 - 01:14 | 3156776 dr.charlemagne
dr.charlemagne's picture

Platinum is not a great metals play in strong economic times because although it should hedge inflation, it has a bigger downside risk in the event of the inevitable slowdown. However, currently we are in a protracted slowdown, the price has slumped below gold and we have ZIRP, QE, currency wars, supply issue and severe risk of inflation going forward. Seems to me like the perfect time to add platinum to a physical metals portfolio!

Wed, 01/16/2013 - 12:11 | 3157718 Kobe Beef
Kobe Beef's picture

The Fed, The ECB, The BOJ, & The BOC can't print platinum.

Wed, 01/16/2013 - 01:48 | 3156808 Aurora Ex Machina
Aurora Ex Machina's picture

Platinum has an extraction ratio of 1:13.13 to gold, and is (like silver) an industrially useful metal.  Smart people would look towards next gen battery tech, not CAT converters. Oh, and the extraction rarity index. (I've said all this before, with sources).

People are closing mines because Global demand (for cars, see further ZH on channel stuffing) is fuck all, Baltic is under 1k and so on; has nothing to do with medium / long term trends, it's just a measure of how crappy the entire Global economy is. Do a bit of research if they're actually giving up the (future) leases to said mines; my guess is that they're not. (Unlike diamonds, for instance, where people are actively dumping the claims, and the old guard actively dumped everything).

 

Translated: you're seeing a short term slow down in demand & immediate cutting of wages / staff to protect profit margins, not a shift in the industry itself. Start pinging MIT or MGU for how useful platinum might be in the next 50 years for a long term investment strategy. My guess: indium went from $60 > $1,000 >  $500 (global slow-down) very quickly indeed once it started to be used; and like platinum, it's an actually rare metal.

 

Your research project is identifying where the next break through is, and if it uses platinum (hint: one at least does), not considering it as a hedge / existing commodity.

Wed, 01/16/2013 - 12:14 | 3157729 Kobe Beef
Kobe Beef's picture

Help us out. Any recommended reading on Cutting-Edge Metallurgy?

Cheers,

Beef

Wed, 01/16/2013 - 15:26 | 3158953 Aurora Ex Machina
Aurora Ex Machina's picture

Not sure how technical you want your briefing.

September 2012 Carbon Trust report [warning: PDF]. Leaving aside their obvious bias towards success, look for section #4 [page 9], where the three techs are discussed; the savings are (potentially) 27 / 29 and 47%. The 47% reduction ($49 / kW > $26 / kW) is from Imperial College, who are 100% reputable (in the top #5 science University, UK, [source]).

Some bimetallic platinum alloys have shown increased electrochemical activity towards methanol oxidation when compared to platinum. This has an added advantage in that the amount of platinum is also reduced. Only the surface of a catalyst promotes a reaction, the inside does not normally affect the reactivity of catalytic particles. Therefore it is possible to further reduce the amount of platinum used by having it present only on the surface. Catalysts of this type are known as Core-Shell Catalysts. Platinum monolayers have been made on ruthenium nanoparticles, which is also a highly electrochemically active catalyst towards methanol oxidation. Ruthenium is currently cheaper than platinum but also rare. Therefore, if a significant use for ruthenium were found, its price would probably increase to be comparable to that of platinum. We are therefore combining the idea of coating another metal with platinum to reduce the loading, but also using a less rare metal as the bulk metal. [source]

There's also a lot of stuff out there on water exchange / filters using new materials; any Google search using the terms PEM / PEMFC / microfibrous / sorbents will get you in the technical ball-park. This research lab seems to be at the centre of a lot of papers, and is American [note: unlike Imperial, I have no idea at their reputation].

Here's  a sample American press release, from Oak Ridge, about another way to improve them.

 

It's not really the platinum that has changed, it's the surrounding tech. But platinum is a fairly safe bet [in terms of rarity / availability / efficiency] as a core component, even if the amounts used are less / individual unit; aside from efficiency levels, the real problem with PEM / PEMFC etc tech is scale. i.e. not enough platinum for society-wide roll-out. Thus the drives to reduce / use mono-layers of it. Once that's cracked, costs go down, but mass production potential goes up. "A computer in every home" type deal.

 

Enjoy the nod to a potential next gen jump in pricing btw, it's a freebee.

Wed, 01/16/2013 - 09:41 | 3157176 sessinpo
sessinpo's picture

Not really relevant to the automotive industry as a poster has suggested. Rhodium and Pallium, of the Platinum metals family, are more commonly used. My father was a pioneer in the development of rhodium as a chemical in catalytical converters throughout the 1970s at GM as an inorganic research scientist with multiple patents to his name (GM owned those patents of course).

 

I see this as a gimmick. Explained another way.

let's say real estate has been hot and maybe at the peak of a bubble. Sales begin to drop and flip floppers are starting to get burned.

Low and behold, someone comes up with another real estate investment idea, REITs, or maybe something to do with condos or time shares. But it doesn't change the fundamentals. It is marketeers trying to sucker the last few dollars into a dying market.

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