South Africa’s platinum mining industry is in crisis, according to the Wall Street Journal (WSJ).

“There is no end in sight to the problem of rising costs and falling demand, leaving little alternative to widespread mine closures,” the influential global business daily reported this week, citing senior executives in the industry.

These comments came shortly after the world’s largest platinum producer, Anglo American Platinum (Amplats), said it lost $753 million in 2012.

It also admitted that it found that the South African government was obstructing its plan to restore profitability by shutting loss-making mines.

The South African government wants to preserve 14.000 jobs which are expected to be lost if the company continues with this restructuring.

“This is an unsustainable position,” the newspaper quoted Cynthia Carroll, Chief Executive of Anglo American PLC as saying. Anglo American has a majority stake in the platinum producer. “We have to restructure the business to make it viable.”

South Africa’s platinum mining industry accounts for 80 percent of global supply.

“We have seen several years in which levels of demand for platinum have fallen significantly short of the industry’s expectations—in part because of depressed world economies and the consequential downturn in the automotive sector,” said Carroll.

Platinum is used mainly in catalytic converters that scrub the exhaust fumes of automobiles.

The daily said demand problems were exacerbated in the second half of last year when thousands of mine workers shut down a swath of the country’s mineral production.

Mining companies had to increase wages to get workers to return—by up to 10 percent in the case of worst-hit Lonmin.

“Costs have continued to rise relentlessly,” said Carroll, adding that since the start of 2011, labor costs have risen 8 percent, the cost of electricity and diesel increased 19 percent. But the platinum price fell around 3 percent.

Steve Phiri, Chief Executive of South Africa’s Royal Bafokeng Platinum, told the newspaper that almost 60 percent of the South African platinum industry was now either breaking even or making a loss, based on a price for the metal of $1.600 a troy ounce.


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