-- Aquarius Platinum halts Marikana mine due to weak platinum
price
-- Forecasts weak platinum price outlook in short-to-medium
term
-- Analysts expect more platinum mine closures given high costs,
weak demand
(Updates to add analyst comment throughout.)
By Devon Maylie and Tatyana Shumsky
JOHANNESBURG--Platinum is rarer than gold, but is becoming too
cheap to mine, analysts and experts said.
Anglo American Platinum Ltd. (AGPPY, AMS.JO) and Aquarius
Platinum Ltd. (AQP.LN)--among the world's largest mining companies
of the precious white metal--said Monday they would halt production
at their jointly owned Marikana platinum mine in South Africa due
to low platinum prices. Futures are down 16% of their February
highs, recently trading around $1,450 a troy ounce.
The move is likely to trigger wider production cuts across the
industry, analysts say, as other platinum mining companies opt to
shut down rather than sell platinum at a loss.
"Obviously they drew a line in the sand and said that's it, this
operation has to go. And I think there are others that may follow,"
said Nikos Kavalis, commodity strategist with Royal Bank of
Scotland.
The metal is scarcer and more expensive to extract than gold and
traditionally trades at a higher price. But weak industrial demand
for platinum and worries that the euro-zone debt crisis will sap
global growth have pressured platinum below the price of gold, and
below the cost of production for a growing segment of the
industry.
The Marikana closure could signal a willingness on the part of
Anglo Platinum, the world's largest platinum producer, to remove
excess and inefficient capacity from the market, said analysts at
Panmure Gordon & Co.
However, the production cutbacks--even if other mining companies
follow suit--aren't expected to dent supplies for some time to
come.
Platinum supply has outpaced demand in recent years as producers
kept output steady, even as automotive production in the U.S.
declined during the recession. Catalytic converters in vehicles are
a key source of demand for the metal.
"Unless something happens to either supply or demand, the market
looks to remain in a surplus over the next few years," said Mr.
Kavalis.
Metals consultancy Thomson Reuters GFMS estimates that the
platinum market will have a surplus of 735,000 ounces this year,
while Johnson Matthey said the 2012 surplus will be similar to last
year's--which was 430,000 ounces.
Anglo Platinum has already cut capital spending plans at its
South African platinum mines, by about 1 billion rand ($13 million)
both last year and the same for 2012. The company decided to
prioritize less capital-intensive projects in the near term given
volatility in the platinum markets and escalating costs.
And in May, Lonmin PLC (LMI.LN), the world's third largest
primary platinum producer, warned there was a risk production plans
in the industry could change, given "an unrelenting depressed
pricing environment."
"We believe we may finally be close to witnessing industry-wide
supply discipline and production cuts," said Dominic O'Kane, an
analyst at Liberum Capital.
Write to Devon Maylie at devon.maylie@dowjones.com
--Francesca Freeman in London contributed to this article