PLATINUM WEEK-S.Africa 2012 platinum supplies unlikely to rise-JM

JOHANNESBURG Mon May 14, 2012 6:00am EDT

JOHANNESBURG May 14 (Reuters) - There is little prospect for a rise in South African platinum supplies in 2012 and shipments of the precious metal from the world's top producer will likely decline this year, metals refiner Johnson Matthey said in a report on Monday.

About 80 percent of the world's known platinum group metal reserves, valued by Citibank at $2.2 trillion, lie in South Africa, where the industry has been hit by labour unrest and a government safety drive.

Supplies of platinum from South Africa increased by 5 percent in 2011 to 4.86 million ounces because of inventory releases, the metals refiner said in an annual report.

"The potential for an increase in platinum supplies (from South Africa) in 2012 is weak ...We conclude that overall, shipments of platinum are likely to decline this year," Johnson Matthey said.

But it said the outlook for other platinum group metals from South Africa was "somewhat different".

South African palladium supplies fell last year by 3 percent to 2.56 million ounces as producers added to stocks while rhodium shipments were also below underlying production.

"Supplies of these metals are likely to at least remain flat, and may even increase modestly, in 2012," Johnson Matthey said.

CHALLENGING ENVIRONMENT

Getting platinum out of the ground remains challenging and mine output from South Africa fell by 3 percent or 120,000 ounces in 2011, the report said.

This partly stemmed from a government drive to boost safety in South Africa's mines, which are among the most dangerous in the world.

The safety push has seen a surge of inspections and temporary stoppages for violations, disrupting output and provoking protests from the industry.

In April for the sector as a whole three miners were killed on the job in South Africa, down from an average of close to 11 per month, so the government will feel vindicated and may maintain the pressure.

The sector has also been shaken by labour militancy.

Impala Platinum (Implats), the world's second largest producer of the precious metal, lost 120,000 ounces in first-quarter production due to an illegal and often violent 6-week strike at its Rustenburg operation.

At the heart of this conflict was a turf war between rival unions who may take their battles elsewhere and it is by no means clear that the dust has settled at Rustenburg, which accounts for 15 percent of global supply.

World No. 1 producer Anglo American Platinum (Amplats) expects to produce between 2.5 million and 2.6 million ounces of platinum in 2012 and Johnson Matthey said it should benefit from a reopened shaft.

In Zimbabwe, home to the second-largest known reserves after neighbouring South Africa, the report said platinum supplies soared 21 percent to 340,000 ounces last year as Amplats' new Unki mine came online.

Production has risen in Zimbabwe against the backdrop of a difficult investment climate as the government forces foreign miners to cede 51 percent stakes in their operations to local black investors.