Pro-business GNU could help SA platinum sector – WPIC

South African President Cyril Ramaphosa (L) smiles as SOuth African Minister of Agriculture John Steenhuisen (C)shakes hands with South African Deputy President Paul Mashatile (R) at the sitting of the South African Parliament for the swearing in of Cabinet Ministers, on July 03, 2024, in Cape Town. South Africa's new unity government under President Cyril Ramaphosa was sworn in on Wednesday, the first of its kind in the country after 30 years of rule by the ANC. Ahead of the 32 ministers -- from six parties -- making up the cabinet, Paul Mashatile, who has been re-appointed deputy president, was the first to take the oath during the televised ceremony in Cape Town. (Photo by RODGER BOSCH / AFP) (Photo by RODGER BOSCH/AFP via Getty Images)

SOUTH Africa’s newly instituted Government of National Unity could help the platinum group metals (PGMs) industry to respond quicker to market cycles, said BusinessLive citing a report by the World Platinum Investment Council (WPIC).

Commenting on the participation of the pro-business Democratic Alliance (DA) in the GNU, the WPIC said it “may promote economic liberalisation alongside reforms to Eskom, Transnet and the Labour Act”.

“Reducing South Africa’s international risk profile could strengthen the currency and reduce SA PGM miners’ margins,” said the council. “However, regulatory liberalisation would allow miners to be more reactive to market conditions, in both up and down cycles.”

“Platinum’s muted price action to deficits between 2023 to at least 2028 may be reflective of a current inability to flex output in response to underlying market conditions. Improved South African governance and higher for longer automotive demand are separately or together both supportive of platinum’s investment case.”

Political developments on the world stage could also assist PGM prices, the WPIC said. Right leaning political parties gaining seats in the EU parliamentary elections might influence the rate of electric vehicle adoption. EVs don’t use autocatalysts which absorb the majority of PGM supply.

Commenting in May in its first quarter review, the WPIC said platinum was heading for another supply deficit this year of some 476,000 ounces. The metal recorded a 878,000 oz deficit in 2023, the WPIC said in March.

Falling mine supply was the main reason for this year’s deficit forecast, largely owing to South Africa where supply was forecast to fall 2% following restructuring of lossmaking mines. Production stoppages due to maintenance and amid sanctioning of parts supplies would result in a 9% decline in Russian production this year.

All in all, total platinum supply is expected to remain flat at 7.1 million oz. An improvement in recycled supply will be offset by a 3% decrease in mined supply, down 147,000 oz to a total of 5,47 million oz, it said.