Wage talks resume as South Africa platinum strike marks 13th week

Reuters News
Posted: Apr 24, 2014 3:21 AM

By Ed Stoddard

JOHANNESBURG (Reuters) - Marathon talks aimed at ending a crippling three-month strike in South Africa's platinum sector were to resume on Thursday after the world's top producers and union AMCU spent two days haggling over an offer tabled last week by the companies.

The strike is already the longest and most costly in living memory for South Africa's mines, though there has been a renewed drive to break the deadlock in recent days after several weeks with no formal direct talks between the two sides.

The talks involve the Association of Mineworkers and Construction Union (AMCU) leadership and chief executives from Anglo American Platinum, Impala Platinum and Lonmin. Both sides have been tight-lipped about the progress.

Underscoring the widening impact of the stoppage, Amplats said on Thursday it now expected full-year production to be 2.1 million ounces, down from previous guidance of 2.3 to 2.4 million ounces.

There is "potential for further downside revisions from the ongoing industrial action," the unit of global mining house Anglo American said in a trading update.

A painful restructuring is considered likely after the dust clears from the strike, with job losses expected, especially around Amplats' struggling Rustenburg operations, which it has signaled it could sell or mothball.

Overall, the strike, which started exactly 13 weeks ago, has hit about 40 percent of global production with over 700,000 ounces lost and counting.


Even if the strike were to end next week, production losses will still mount as the mines slowly reboot.

"Based on the extent of direct losses from strike action to-date, and adding in an allowance for lower production as a result of safe-start procedures, re-hiring, re-training and ramp-ups, I expect losses to platinum production this year to be in the order or 900,000 to 1 million ounces," said William Tankard, metals analyst at Thomson Reuters GFMS.

Exacerbating the industry's woes is the muted price reaction to the stoppage despite its scale. Traders have bet there are adequate above-ground stocks and demand remains far from robust in major markets such as Europe.

Spot platinum prices are just under $1,400 an ounce, around 3.5 percent lower than just before the walkout began on January 23.

The sector's viability is also being shaken. Producers have lost 14.5 billion rand ($1.4 billion) to the strike so far, according to an industry website that gives a running tally (http://www.platinumwagenegotiations.co.za/).

These factors plus rising costs explain why the producers have been trying to draw a line in the sand, setting the stage for a protracted show down between capital and labor on South Africa's restive platinum belt northwest of Johannesburg.

AMCU's uncompromising president Joseph Mathunjwa has cast the talks in class war terms and says his union aims to rectify decades of exploitation of black labor by white capital.

Initially demanding an immediate doubling of the basic wage - net salary before allowances such as housing - for entry-level workers to 12,500 rand ($1,200) a month, AMCU has since said it would accept annual increases that would reach this goal in three or even four years' time.

The producers' latest offer, made last Thursday, was for wage rises of up to 10 percent and other increases that would take the minimum pay package - the basic wage including the allowances - to 12,500 rand a month by July 2017.

(Editing by Mark Potter)