Labor Strikes hit top Platinum Producers

UNCLAS PRETORIA 004474 SIPDIS STATE PLEASE PASS USGS E.O. 12958: N/A TAGS: EMIN EINV ELAB EIND ECON SF SUBJECT: Labor Strikes hit top Platinum Producers ¶1. (U) Summary: Strike action by members of the National Union of Mineworkers (NUM) began slowly for the top two platinum producers in the world as talks with management broke down on October 1. By October 4, NUM had launched a full-blown strike against Anglo Platinum (Angloplats) and Impala Platinum (Implats),though the firms and union are less than two percent apart on their wage demands. While 12,000 of 45,000 mineworkers refused to punch in at Angloplats, almost all of Implats' 27,000 mineworkers refused to punch in on October 4. According to press reports police injured 22 miners when they fired rubber bullets into a crowd of miners at an Implats roadblock on October 5. Angloplats says that only 38% of its workforce belongs to NUM and one-third of NUM members actually showed up for work on October 4. Implats maintains that the strike will not affect production for ten days, after which, the company stands to lose more than $4 million a day in operating profits. Lonmin Platinum (Lonplats),the third largest producer of platinum in the world, has not been affected. Still at issue is money. The unions see high company profits and want more. Other issues, such as an increase in the housing allowance, seem to have been largely resolved. End Summary. ¶2. (U) Since wage talks began at the beginning of August, NUM has moved from its initial demand for a 16% wage increase to 9% for Anglo and 8.5% for Impala. In turn, Implats has moved from 6.3% to 7.5%, Angloplats from 4.4% to 7.25%. In its previous two-year wage agreement with NUM for the years 2002 and 2003, Angloplats agreed to a 9% wage increase for each of the two years, something it was unprepared to replicate now that inflation is around 5%. Implats was surprised by the NUM strike, since it had just entering the second year of a two-year wage agreement. That agreement calls for a wage increase of 1.4% over inflation, which would give workers an automatic 6.3% increase this year. NUM has rejected both the Angloplats and Implats offers as inadequate, pointing to high platinum prices and industry profits as justification for a greater share of the spoils. Five other unions have members working at Implats and Angloplats, but they have not yet thrown in their lot with NUM. NUM claims that 47,000 workers are on strike, while management at Angloplats and Implats claim that fewer than 40,000 are on strike. ¶3. (U) According to "Platinum 2004," a Johnson Matthey publication (British-based Johnson Matthey is the world's leading trader of platinum group metals, and the sole trader for Angloplats),South Africa produced 75% of world platinum in 2003. Of that, Angloplats (2.3 million ounces),Impala (1 million ounces),and Lonplats (900,000 ounces) accounted for two thirds - or more than half of world production. Each has invested in major expansion programs. In addition, exports from these three companies accounted for 9% of all South African merchandise exports in 2003. ¶4. (U) South African platinum group metal resources in the ground represent more than 85% of the known global resource. In addition to platinum, South African mines produce 35% and 75%, respectively, of global palladium and rhodium. Other group metals, such as iridium, ruthenium, and osmium, are less common. Any disruption in South African production should have an immediate effect on world PGM prices. Interestingly, during the week of wage negotiations, platinum prices actually fell, reflecting a move out of the market by some Japanese investors, lower than expected Chinese orders, existing inventories, and the price having already climbed as investors anticipated the strike. Prices have returned to pre-strike levels. ¶4. Table: Platinum Group Metal Prices ($/oz) Metal September 27 October 5 October 6 Platinum 854 835 850 Palladium 222 216 225 Rhodium 1180 1300 1300 ¶5. Table: World Platinum Production (million ounces) 2002 %Total 2003 %Total Percent Change South Africa 4.45 74.5 4.67 74.8 +4.9 Russia 0.98 16.4 1.05 16.8 +7.1 Other 0.54 9.1 0.52 8.4 -3.7 Total 5.97 6.24 +4.5 Frazer