Tough times hit platinum industry

different unions at Lonmin’s Marikana Mine outside Johannesburg. Police were called in, and gunned down 34 protesters on Thursday.
The killings horrified the country and brought back memories of apartheid brutality, but analysts said the Lonmin Mine incident was a culmination of troubles in the platinum mines, the largest employer in the mining sector.
South Africa sits on more than 80 percent of the world’s platinum deposits and is responsible for three-quarters of global production of the metal, mostly used in catalytic converters to cut vehicle pollution and in jewellery.
“The platinum industry has struggled since the beginning of the economic crisis in 2008,” said Alex Benkenstein, senior researcher at the South African Institute of International Affairs.
“Even before the events at Marikana we saw signs of an industry in trouble, with earlier strikes at Impala Platinum and Aquarius Platinum, and Royal Bafokeng Platinum announcing a 60 percent drop in first-half earnings for 2012.”
At least three people died in the Aquarius violence, also linked to the same union feud earlier this year.
About a month ago, Anglo American Platinum was hit with a week-long work stoppage.
All of the strikes have been staged by rock drill operators — the men who go hundreds of metres underground to break up the ore-bearing rocks in search of the nuggets of the white mineral.
“Theirs is the most dangerous job in the mining industry. They go down carrying 25 kilogrammes of drilling equipment,” said John Cope, director of Bench Marks Foundation, a church-based group that studies working and living conditions of the mainly migrant miners.
He said of the workers’ living conditions and wages: “We find them to be atrocious. We had warned there would be uprisings and violent protests”.
The striking workers at the Marikana Mine were demanding a tripling of their wages from the current 4 000 rand ( US$486) a month.
The dip in the global economy has not helped the platinum sector whose largest clients, automakers, are battling reduced demand. New vehicle registrations in the EU are down about one quarter compared to June 2010, according to statistics from BNP Paribas.
The depressed demand has seen prices come down from a high of nearly US$2 000 an ounce about a year ago to around US$1 400.
A surge in production costs, energy top among them, mean wage demands take a second priority.
Electricity costs in South Africa have nearly doubled since 2010, as the national utility Eskom seeks to finance a huge expansion of the power supply.
“Companies are squeezed between rising production costs and lowered demand, particularly the slump in the automotive industry which accounts for almost half of the platinum market,” said Benkenstein.
While rivalry between the National Union of Mineworkers and the upstart Associated Mineworkers and Construction Union appears to have led to the escalation of the unrest at Marikana, deep-seated frustrations have fed into the workers disillusionment.
“Marikana has provided a shocking image of the stakes involved in managing conflict within the mining sector,” said Benkenstein.
In the platinum industry “social tensions seem to be spiralling out of control. The social situation will also make it more difficult for companies to make production cuts in the coming months,” said BNP Paribas Corporate and Investment Banking’s Anne-Laure Tremblay.
Lonmin said it has lost 15 000 ounces of production due to the strike, meaning it won’t meet its annual target of 750 000 ounces.
The unrest at Marikana has given a temporary boost the price of the metal which gained 6 percent since the police shootings on August 16. — AFP.