A power crisis in South Africa, the world's biggest platinum producer, could slash output by 200,000 ounces this year, and other operational hiccups may crimp production further, a leading metal refiner said on Monday.
South Africa, which accounts for over three-quarters of global platinum supply, saw production in 2007 fall 260,000 ounces to 5.04 million ounces, Johnson Matthey said in its Platinum 2008 report on Monday.
A new approach to safety by South Africa's government -- the temporary closure of shafts where fatal accidents occur -- and other operational challenges had weighed on production, it said.
Global supply fell 4.1 per cent to 6.55 million ounces, largely due to lower output from South African producers.
Though the power situation has stabilised, with mines receiving around 90 percent of their normal electricity requirements, state utility Eskom has warned the country could still face the possibility of further power cuts.
Platinum hovered around $2,000 an ounce amid signs electricity supply in South Africa was returning to normal after a five-day power cuts in January forced mines to shut down operations, sparking supply fears and sending prices to record peaks.
Assuming that electricity supply can be maintained through the South African winter and power is available for new and expanding operations, the overall effect on South African PGM production in 2008 is estimated to be a shortfall of under 200,000 ounces of platinum, less than initially feared, JM said in its report.
JM also forecast a substantial deficit in the overall world platinum market for 2008.
Platinum is in high demand for its use in auto catalytic converters that remove pollutants from exhausts, as well as in jewellery.
ANGLOPLAT TAKES A HIT
South Africa's Anglo Platinum Ltd, majority owned by mining giant Anglo American Plc, scaled back its output forecast by 150,000 ounces for this year owing to the power crisis. The firm accounts for 40 percent of global platinum production.
Angloplat's woes were worsened by flooding at its Amandelbult mine, which has been shut for months, and is due to re-start production during the second quarter.
The power supply crisis and flooding in early 2008 will affect production this year, the report said.
Second-ranked Impala Platinum, which accounts for nearly 30 percent of world platinum supply, has also forecast reduced output from its mines and refining operations.
Production could also fall from the slow ramp-up of production at the No. 3-ranked Lonmin's new mechanised shafts, JM said.
Shortage of skills has also hurt output, the report added.
JM expects worldwide production this year to fall short of 2006 levels of 6.79 million ounces even if there were to be some recovery from 2007, which was blighted by smelter closures, geological, equipment hitches and wage demand issues.
The metal refiner said it expected the power crisis to hang over South Africa's platinum sector until 2012, and that the power gap may delay the start of new platinum projects.
For this year, any further interruption to South African power supply will push the metal's price higher, JM said, adding that the political crisis in Zimbabwe over a disputed election could damage output from that southern African country.
We therefore expect platinum to trade in a wide range from $1,775 to $2,500 during the next six months, the report said.
(Editing by Ben Tan)
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