JOHANNESBURG: Wage talks between the world’s top platinum producers and South Africa’s Association of Mineworkers and Construction workers Union (AMCU) collapsed on Wednesday, dashing hopes for an early end to a crippling six-week strike.
The stoppage – in a sector still raw from a series of violent strikes in 2012 – has hit over 40 percent of global production of the precious metal used for emissions-capping catalytic converters in automobiles.
It also dealt a fresh blow to investor confidence in Africa’s biggest economy.
The spot platinum price spiked to six-month highs over $1,480 an ounce after the three producers, Anglo American Platinum, Impala Platinum and Lonmin, said government-mediated talks had broken down.
Lonmin, the smallest and most vulnerable of the trio, said it would now miss its platinum sales target this financial year of 750,000 ounces. Its share price fell over 7 percent.
Amplats said in a statement the talks “have been suspended indefinitely.” The government mediator, the Commission for Conciliation Mediation and Arbitration (CCMA), said the “parties still remain far apart” and so it was time to give them “an opportunity to reflect on their respective positions.”
AMCU said on Tuesday it had softened its stance for the first time, saying it now wanted staggered increases to bring the basic entry wage to 12,500 rand (U.S. $1,200) a month in three years’ time, over double current levels, instead of immediately.
The companies, however, say they are sticking to their latest offer of increases of up to 9 percent, setting the stage for a protracted and grinding showdown between capital and labor on the restive platinum belt.
The stoppage is also an unwanted distraction for President Jacob Zuma and the ruling African National Congress (ANC) ahead of general elections in May and AMCU plans a protest march on Thursday in Pretoria to the Union Buildings, the seat of government.
The AMCU emerged as the top union in the platinum shafts in 2012 after wresting tens of thousands of members in a bloody turf war from the once unrivalled National Union of Mineworkers, a key ally of the ANC.
COMPANIES, LABOUR SUFFER
Over 300,000 ounces of platinum production have been lost to date in this strike, far short of the 600,000 ounces Thomson Reuters GFMS estimated South Africa lost in 2012 when violent wildcat strikes swept the sector.
This strike is still shaping up to be one of historic proportions as the two sides dig in for the long haul.
Employees have lost over 3 billion rand and counting in earnings lost to the strike while it has cost the companies so far almost 7 billion rand in revenue, according to a tally updated almost every second on the Chamber of Mines’s web site:
Both AMCU and company sources have said that many of the striking workers, who hail from rural areas in the Eastern Cape province hundreds of kilometers from the platinum mines, have returned home to wait out the stoppage.
“The longer the strike continues, the greater the impact on our higher cost shafts, our ability to return to a normal operating environment and obviously on jobs,” Ben Magara, Lonmin’s chief executive, said in a statement.
AMCU officials were not immediately available for comment.
While platinum’s spot price leapt on Wednesday, the price reaction to the strike so far has been fairly muted – another cause for concern to the industry.
“Some people at least thought this strike would be resolved by now … However, we haven’t yet got to the position where end-users are concerned about availability of metal,” said Tom Kendall, an analyst at Credit Suisse.