As strikes in the platinum sector of the South African mining industry continue, the market for the precious metal with industrial uses is expected to be in deficit for 2012 and the next few years.
This is according to Impala Platinum group executive for marketing Derek Engelbrecht who said at a conference in Hong Kong, and quoted by Reuters, that the market could be in deficit for the next few years, based on lower supply and growing demand from the automotive industry.
"We think the market is in fact moving into deficit this year, based on a significant decline in South African supply and a small reduction of jewellery being recycled because of lower prices," he told the conference.
"With relatively stable demand, it will push the market into deficit. We believe that will continue for the next few years, again based on lower supply from South Africa, and we also believe the automotive industry is growing."
China, the world's largest platinum jewellery market, could see flat demand this year, although small growth was expected going forward, he added.
Speaking about months-long labour tensions in the industry in South Africa, Engelbrecht said the government was unlikely to take steps to ease the strife ahead of a key conference of the African National Congress (ANC) set to take place next month.
"The situation is still quite volatile," Engelbrecht said.
"We believe it's not just linked to higher wages. We think there's another agenda, possibly some kind of political agenda. We can't be 100% certain on that or who's behind it, or if the motive is to delink the unions from the ruling party."
Engelbrecht said the government may not take significant measures even after the ANC conference to avoid upsetting their alliance parties.
Labour strife in South Africa's mining sector has supported platinum prices, at a time when uncertainty in the outlook for the global economy is weighing on demand for the metal mainly used in jewellery and autocatalyst production.
The unrest in South Africa could continue to push up mining costs and force miners to start trimming their output, he said.
"Mining inflation in South Africa has been running at somewhere between 12% to 15%. Compounding the inflation environment, the productivity has in fact been declining slightly. It's not a very good combination," Engelbrecht said.
