13th July 2007

Recent developments in the platinum group metals markets have been dominated by news of the wage negotiations between miners unions (including the NUM (or National Union of Mineworkers) and Solidarity) and the platinum producers in South Africa.

These negotiations over wages and conditions take place every two years in the South African platinum mining industry but appear to be more fractious this time than in recent years. With food inflation running at 9 per cent per annum, initial union demands were for double digit percentage pay rises and there was initially a large distance between the two sides. However, throughout June, this negotiating gap closed somewhat with the prospects of a strike diminishing but not disappearing.

The declaration of an official strike follows a set procedure, with one step being the declaration of a dispute. This has happened at a number of South African producers, opening the door to industrial action, although many such declarations do not finally lead to strikes. Some progress has been seen in discussions at all of the producers and the gap between negotiating parties has narrowed considerably but there remains some prospect of a strike and a disruption in primary metal production.

With the whole of the South African industry routinely mining and processing 100,000 oz of platinum a week, a short term strike at individual producers would hit 2007 output to a degree. A more prolonged strike seems unlikely but would have the potential, as noted in our Platinum 2007 review, to impact upon PGM market liquidity and to raise prices and volatility. However, most market observers believe that the prospect of a limited amount of industrial action is already implicit in the price.