BL Premium writes that the scene for tough wage talks in the platinum sector has been set now that the dominant Association of Mineworkers & Construction Workers Union (Amcu) has demanded a minimum wage of R17,000, just as the troubled industry begins to find its feet again.
Platinum producers have been struggling to eke out a profit for years, but an unexpected surge in the palladium price — it’s gained 150% in three years — and the crumbling rand have given PGM producers a leg-up this year.
The price of rhodium, meanwhile, has risen by 300% since 2016.
Adjusted earnings among local PGM miners were a third higher in the first quarter of 2019 against 2018, says Amcu. That helps explain a 58% spike in the JSE’s platinum index since January 2, which Amcu hopes its members will benefit from.
Along with other provisions for housing, transport, provident funds, medical aids and more, the total cost to company demand per employee would hit R30,000.
Nedbank Corporate & Investment Banking analysts Leon Esterhuizen and Arnold van Graan say the industry is profitable, but still licking severe wounds from 10 years of underinvestment and high debt.
They say that while the basket price for platinum, palladium and rhodium has indeed been "extraordinary" of late, it foretells a lower future price as past spikes above this level have only ever lasted a few months.
"A damaging strike at this stage would cause excessive harm to the industry as it could remove what could be a once in a lifetime opportunity to get back to good health," they say. "It is most certainly not in labour’s best interest to undermine the current improvement in profitability … We don’t see a settlement above 10% and we see strike potential as very low."
Rene Hochreiter, mining analyst at Noah Capital Markets, says PGM producers cannot be sustainable in the long term if they continue to give inflation-plus increases. Hochreiter’s outlook for the platinum sector is "damn good", he says. "But you have to make sure to keep the purse strings tight. R17,000 a head is wrong."
Unlike the gold sector, wage negotiations for platinum are not centralised and take place at a company level.
This makes obtaining clear data on what companies pay staff tricky.
But R17,000 would constitute a 47% leap from the present Amcu estimate of a minimum wage of around R11,500 per worker.
Platinum prices, too, continue to languish at lows of $800 to $900 an ounce. The blame lies largely with the companies for ramping up production and grossly oversupplying the world market with a metal that can also be recycled.
Amcu is associated with a signature wage demand of R12,500, first launched in 2012. In general it has yet to achieve this for its members, however. But it says the new demands are based on a conservative average of 4.5% inflation over the past seven years and are realistic.
Most SA platinum producers have had little to say ahead of wage talks, which will probably begin in earnest next month.
But Sibanye-Stillwater, the world’s largest platinum producer, has been quick to say the demand is "impractical and unaffordable", noting that all stakeholders would be negatively affected if the company acceded to it.
Anglo American Platinum (Amplats) is in the best position: a major restructuring has left it with no debt and clear strong cash generation, Esterhuizen and Van Graan note.
Its Mogalakwena opencast platinum mine in Limpopo is one of the most profitable in the world. It’s also highly mechanised and Amcu doesn’t have much of a presence there. Amplats’s labour-intensive Amandelbult operations are most vulnerable, but earlier this month CEO Chris Griffith said the company had done a lot of work with employees ahead of the wage talks and didn’t get the sense there was much appetite for a strike.
Northam Platinum is also somewhat insulated. The National Union of Mineworkers is the dominant union at its Zondereinde mines, where a three-year wage agreement was concluded last year. At its Booysendal mine, near Mashishing, management will have to negotiate with Amcu.
Those on the western bushveld, Impala and Sibanye-Stillwater, are in the worst position, though it is in no-one’s interest for wage talks to turn into a strike.
"Certainly not while the prices are this high, allowing for significant debt relief and the returning capital strength needed to recapitalise the production base," say Esterhuizen and Van Graan.
The same goes for employees who are currently making good bonuses and will have noted the outcome of the recent five-month strike at Sibanye’s gold operations.
But there is a concern that hardened attitudes between Amcu leader Joseph Mathunjwa and Sibanye-Stillwater CEO Neal Froneman during Amcu’s long strike at the company’s gold operations could colour negotiations.
Mamokgethi Molopyane, mining and labour analyst, says: "This round requires strategy perhaps more than the previous ones, but it must be peppered with the reality of what’s happening in the sector and leaders will have to keep their personalities in check."
To be most closely watched is what unfolds between Amcu and Sibanye at its recently acquired Lonmin operations, where poor labour relations contributed to the Marikana massacre in 2012, in which 34 protesters were killed by police during a strike.
Sibanye and Amcu have been mostly conciliatory since the gold strike ended.
Molopyane says the political language of unions in SA must be balanced with the reality of the industries in which they operate. "Business and companies cannot afford protracted strikes, but workers will come off worst."
The original of the above report by Lisa Steyn appeared at BusinessLive (paywall access only)
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