Spend on platinum marketing rather than mining more, Amplats boss urges
With two-thirds of mines marginal or unprofitable, the sector has lost thousands of jobs in recent years
The best way for SA’s embattled platinum industry to save itself from prolonged difficulties is to switch focus to intensive marketing and spending on creating demand rather than trying to lower costs and mining more metal, says Anglo American Platinum CEO Chris Griffith.
SA’s platinum sector, in which two-thirds of mines are marginal or unprofitable, has lost thousands of jobs in recent years, with Lonmin cutting 8,000 jobs since 2015 and considering up to 12,600 more, while Impala Platinum has spoken of cutting 13,000 jobs as it shuts old mines.
“Many of our peers still think of the business as a volume industry and getting costs down by producing more, and that volume will always be there rather than investing in creating demand,” Griffith says. “Frankly what you should do is cut back on other spending to invest in marketing to create a future for your metals. You cannot blindly expand into a market where there is no demand.”
“We understand the business of investment because we do this all the time, but I don’t think there’s an equal understanding among all our peers that the first thing we should invest in is market demand to have something to sell into rather than being the last thing you do with leftover money,” he says.
Platinum, which has three principle applications — in autocatalytic converters for diesel engines, to make jewellery and for industrial devices — comes mainly from SA and a small number of companies, which have come under pressure from low and stagnant prices for the metal as mining costs have risen sharply.
Sentiment towards diesel engines and by extension platinum soured after the Volkswagen Group was caught in late 2015 cheating on emissions data from its diesel motors in the US.
Sentiment in Europe, the biggest diesel market, has turned negative, and, coupled with overstated fears about the rise of battery electric vehicles, platinum prices have taken a battering.
As part of a core strategy within Amplats, the world’s leading producer of platinum, the development and encouragement of alternative markets and uses of platinum is receiving priority attention, said Griffith.
Within the strategy is hefty spending on market development agencies such as the Platinum Guild International, which promotes platinum jewellery in key markets such as China and India; and the World Platinum Investment Council, which is pouring information about the metal into the investors’ market and encouraging private and government agencies to develop investment products.
Amplats has split out the investments it had made in various companies researching and developing platinum-based technologies into a separate company that is co-funded by SA’s Industrial Development Corporation.
While other companies such as Impala Platinum, Lonmin, Sibanye-Stillwater, Northam Platinum and Royal Bafokeng Platinum all make contributions to the jewellery and investment organisations there has to be much greater participation, particularly on the financial side, to encourage these bodies, says Griffith.
Amplats spends $50m a year on market development, of which $30m is on the jewellery markets, $10m into industrial market development and the balance on encouraging investment and other uses, he says.
“In a commodity where you can create additional demand, if you miss that opportunity you miss the potential for a huge increase in demand,” he says. “If you don’t do that, and you face headwinds in other portions of your business you could materially impact your business by not cultivating other opportunities.
“In jewellery, for example, you create demand. Without doing that it doesn’t exist. With really good marketing you can change consumer behaviour and create demand.”
Platinum is a relatively young metal in the global economy and there is research to be done into its unique properties that have still to be discovered, he says.