US embassy cable - 04PRETORIA4474

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