PGM metals news: South African mines expecting profit windfalls from Russia-Ukraine conflict

PGM metals news updates: While the rest of the world, since the conflict began on 24 February, had to deal with rising inflation costs such as fuel and wheat, mining experts predict that the South African platinum mining industry will reportedly benefit from Russia’s military attack on Ukraine. 

As it stands, Russia is the world’s second-largest producer of platinum group metals (PGMs) after South Africa. However, with various countries currently placing sanctions on Russia in a bid to halt the tensions, experts in the PGM industry anticipate that South African mining operations may benefit from these tensions as they will now capture a share of Russia’s supplier market. 

With South Africa being in a key competitive position, it will be able to supply PGMs to other countries, at a higher price, resulting in a higher tax revenue collection from the country’s mining sector. 

A few of South Africa’s mining operations are already experiencing gains in their stocks, with many of these mining firms who are listed on the Johannesburg Stock Exchange (JSE) showing signs of being in a bull market. 

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Emerging as the biggest winner in the country’s mining market over the last 30 days is Thungela Resources Ltd, which produces thermal coal from seven mining operations in South Africa and has gone up by 45.58%, while they have seen an 8,03% increase in the last seven days. 

Tallying closely behind them in reaping the profit windfalls from the Russia-Ukraine conflict is Harmony Gold Mining Company Ltd, which has over the last thirty days shown an increase of 41,25% while showing an increase of 5,57% over the last seven days. 

Meanwhile, Amplats, DRD Gold, and Impala Platinum have over the last seven days shown decreases of 16,13%, 1,07%, and 11,7% respectively, they have also benefited from the Russia-Ukraine conflicts as they report increases of 8,44%, 23,24%, and 1,09% respectively over the last month. 

PGM metals news from Statistics South Africa (StatsSA)

However, to be fair, with the increase in PGM sales in South Africa’s mining operations, the country’s mining industry had over the last year done well for itself. This as the country’s statistics bureau, known as Statistics South Africa (StatsSA) reported that mining production grew by 5.2% last year, with PGMs making up the bulk of these increases as sales rose by 38,1%. In the case of Amplats (ANGLO American Platinum), which is the world’s biggest platinum producer, they have over the last year been doing well, having reported a 4.87% increase. 

One of the biggest benefactors from this mining production growth was Amplats, whose success can’t solely be attributed to how the markets respond to the Russia-Ukraine conflict. This as the company on 21 February this year reported a staggering R80 billion dividend to its shareholders. In a statement released on its website, the mining operation said that it experienced a 160 percent increase in profit, as compared to the R30 billion it had made the previous financial year. The company’s annual results book attributes these gains to an increase in PGMs sales. 

Despite there being optimism on how South Africa may benefit from the Russia-Ukraine conflict, South African media house, IOL reports that Seleho Tsatsi, an analyst at Anchor Capital Investment, revealed that there are concerns that the ongoing war between the two countries will lead to global PGM shortages, which could disrupt car manufacturers. 

IOL reports that “Russia currently produces 2.7 million ounces of palladium, which accounts for 38% of global supply, but in terms of other PGMs, it only produces 10 percent of platinum and rhodium and only 8% of iridium and 4% of ruthenium”. 

Mounting concerns in the vehicle sector

According to the publication, the analyst goes on to state that with Russia producing 40% of the world’s palladium supply and 14% of its platinum supply, there are mounting concerns that the ongoing conflict may lead to a supply in PGMs, particularly in the vehicle sector where car manufacturers have large demands for PGM supplies in order to meet their industrial targets. 

In line with these observations has been by Tsatsi is a statement that was released by the Volkswagen Group after it announced in early March that it would be stopping the production of vehicles in Russia and would further also be stopping all exports to Russia “with immediate effect”. 

The German carmaker is also among the car manufacturers that have in recent weeks halted the export of cars to Russia, amidst the ongoing conflicts and that would also be discontinuing its local production in the country. 

In a statement, BMW said that the current ongoing Russia-Ukraine conflict was impacting all production services across the board in the industry, which was followed by the production cuts we now see today at numerous of its plant operations.  

These halts in production are the latest in a series of blows to carmakers who suffered losses in the industry owing to the impact of the COVID19 pandemic, which resulted in a worldwide shortage of automobile semiconductors. 

Meanwhile, in this latest setback owing to the Russia-Ukraine conflicts, German car manufacturers BMW and Volkswagen have no choice but to temporarily cease production as there are limited supplies of critical car components such as chips, which cannot be produced until tensions between Russia and Ukraine have deescalated. 

As the car industry starts gearing towards decarbonization, PGMs such as the ones provided by Russia as mentioned above remain in high demand as they help control and neutralize the carbon dioxide emitted by vehicles. 

While experts anticipate that with the global demand for PGMS being on the rise, with few suppliers able to meet this demand, it stands to be seen whether South Africa will richly benefit from the conflict or if Russia’s client base won’t seek cheaper suppliers such as Zimbabwe, who are also among the world’s leading platinum suppliers. Until then, the world watches in bated breath as tensions in the Russia-Ukraine conflict escalate, with Russian forces intensifying their attack in Kyiv.