* Mining companies hunkering down for long strike
* Unprecedented work stoppage over 3 weeks old
* Ounces lost still a fraction of losses in 2012
By Ed Stoddard and Jan Harvey
JOHANNESBURG/LONDON Feb 18 A face-off between
platinum producers and striking miners in South Africa has had
negligible impact on metals prices so far, but that is likely to
change if the action grinds on past the end of the month and
stocks are drawn down.
The strike by South Africa's Association of Mineworkers and
Construction Union (AMCU) against the world's top three platinum
mining companies has so far failed to ruffle traders.
Platinum prices traded at around $1,422 an ounce on
Tuesday, about 2 percent below its levels on the eve of the
This is partly because the mining industry is better
prepared than in 2012, when it was swept by a wave of rolling
and violent illegal strikes. A spokesman for major producer
Impala Platinum said last month it had enough in
inventories to supply clients for six to eight weeks.
The strike began over three weeks ago when AMCU members
downed tools at Anglo American Platinum, Impala
Platinum and Lonmin. The two sides remain poles
apart on the issue of wages, suggesting a prolonged stoppage.
AMCU is demanding that basic pay be more than doubled to
12,500 rand ($1,100) a month under the battle cry of a "living
wage", which has been used for decades by an increasingly
restive black workforce.
The typical South African mineworker has on average of eight
dependents and often hails from a subsistence farming background
far from the shafts.
This fuels their demands but also means they will find it
difficult to hold out, while the companies can ride things out
"The platinum producers' balance sheets are not great but at
least they have balance sheets. The AMCU guys have zero balance
sheets," said Peter Major, a fund manager with Cape Town-based
AMCU is also known, however, for its uncompromising stance
on wage talks. It emerged as the dominant union on South
Africa's platinum belt in 2012 after it wrested tens of
thousands of disgruntled members from the National Union of
Mineworkers in a turf war in which dozens were killed.
"How long will the strike take? The struggle is the struggle
at the end of the day," Mathunjwa told a Cape Town Press Club
luncheon earlier this month. "We will continue."
Companies say they can ill afford big hikes as they confront
rising costs and depressed prices. They have offered increases
of up to 9 percent against an inflation rate of 5.4 percent.
A simultaneous strike at the three companies has never
happened before, and the current action has hit over 40 percent
of global supply.
After years of stand-offs with workers over pay and faced
with the more militant AMCU, mining companies are hunkering down
to ride out the strike, analysts said.
"There may be a feeling that in the past decade and half,
we've seen wage increase after wage increase, and I think the
market is trying to tell the industry that that's not
sustainable," said Michael Widmer, an analyst at Bank of America
"The strike can go on for two months; it can go on for
longer," he said. "This is less an issue of the current strike,
it's more about the producers tackling the environment in which
the platinum industry has been operating in the last decade and
The amount of output lost from the strike is much less than
it was in 2012. As of Sunday, the three platinum companies had
lost about 175,000 ounces of production, based on 17.5 working
days, according to South Africa's Chamber of Mines.
In 2012, Thomson Reuters GFMS estimated South Africa lost
about 600,000 ounces to strikes. Metals refiner Johnson Matthey
has estimated the lost output that year at 750,000 ounces at
least, mostly due to strikes but also to shaft closures and
government-ordered safety stoppages.
The current strike would have to last another 57 more
working days, or around two months, for the loss this year to
reach that level.
In the meantime, producers and consumers say there is plenty
of platinum around to meet demand.
"The big question over the last year or so has been, 'Where
are these above-ground stocks of platinum, and who holds them?'"
Macquarie analyst Matthew Turner said. "The size of those stocks
is important, but it's also important who holds them."
Some of this metal is in the hands of the miners themselves,
and some is held by carmakers, who along with Chinese jewellery
buyers are the main end-users of platinum.
Liquidation of these supplies, held as a hedge, will have
little price impact, analysts say, but once they are exhausted,
a higher price may be needed to draw out further stocks of
"(The futures market) shows a net long position of 350,000
ounces of platinum, and the exchange-traded funds hold more than
2 million ounces," one platinum group metals trader said. "All
that metal will come back to the market - at a price."