Platinum miners are under pressure from the emerging platinum recycling industry which now commands more than a quarter of the platinum metals that come to market, an industry player has said.
Platinum recycling is now ranked as the second largest source of metal supply behind mining and is expected to be at the summit of the rankings by 2020.
Zimplats chief executive Alex Mhembere yesterday said recycling has become a major threat to the sustainability of the platinum sector besides declining global platinum prices.
He said recycling has grown to become the biggest supplier of metal contributing 2,14 million ounces in 2014.
“Recycling has become one of the biggest suppliers of platinum in the world. Such a situation has become a huge threat to those companies still trying to find platinum from underground,” said Mr Mhembere.
As mining costs increase due to scarcity of easy mineral deposits technological improvements have however made recycling more competitive on the global market.
“So this is definitely going to affect the sustainability of the platinum industry. Global platinum prices are also going to affect the viability of the industry going forward,” said Mr Mhembere.
He said rising United States of America interest rates, China’s slowdown, a fragile world economy and continued metal supply into already high above-ground stock levels are creating a “perfect storm”, driving down PGM prices .
At the end of quantitative easing in the US in late 2014, the US dollar strengthened as funds flowed from emerging markets to USA, weakening emerging markets currencies and depressing commodity prices.
Mr Mhembere said expectations of an interest rate rise in the USA saw exchange-traded funds shed 100 000 Pt-ounces in the first quarter of 2015, releasing metal into the market.
He said a rate rise in the USA in late 2015 again strengthened the US dollar and weakened emerging markets currencies.
ETFs released another 200 000 platinum ounces in fourth quarter 2015 in anticipation of the expected weaker platinum price.
“US dollar strength traditionally drives sentiment that SA producers will increase PGM output, further impacting prices.
“Leading indicators for the Gross Domestic Product continue to weaken, driving down demand for commodities and creating negative sentiment which is impacting PGM prices,” said Mr Mhembere.
He said with few exceptions, all countries’ leading indicators are falling, pointing to more growth weakness in 2016.