I wrote two weeks ago about substantial production cuts coming in platinum.
And now it looks like the situation is about to get more dire.
That's according to a report released this week by industry watchdog World Platinum Investment Council (WPIC). Which shows that the 100,000 ounce/year production cuts announced by Lonmin last month are just the tip of the iceberg for this sector in crisis.
The WPIC report shows that platinum production in South Africa -- the world's largest producing nation -- is likely to fall by 600,000 ounces, or 16%, next year. Touching 3.4 million ounces for 2016 as a whole -- down from a forecast 4.06 million ounces in 2015. Related:What's Really At Stake With The Iran Nuclear Deal
The data revealed by the report show the South African platinum sector has been decimated. With capital investment in operations here falling by 63% since 2008. Amounting to $1.5 billion in lost funding.
As the chart below shows, investment in the industry is now at its lowest level since 2005. And the decrease in funds has corresponded directly with a precipitous decline in platinum output..
All of which suggests that the South African sector is in a tailspin. One that is unlikely to reverse soon -- given that platinum prices are languishing at their lowest levels since the financial crisis of 2008. At the same time as miners are facing rising costs for key inputs like labor and power. Related: Russia's Natural Gas Plans May Be Little More Than Hype
That raises some gaping issues for the platinum market. Namely, what happens when a place that produces 68% of the world's metal supply sees a critical decline in its mine output?
There have been many analysts (including myself) forecasting a deep and coming platinum supply crunch -- and so far we've been dead wrong. But news like this suggests the future for this market is increasingly uncertain, and prone to surprises.
The takeaway being -- this is a great time to start looking at platinum projects in other parts of the world. They're not easy to find, but they may become one of the hottest commodities going over the next several years.
Here's to a platinum opportunity,
Dave Forest
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Dave is Managing Geologist of the Pierce Points Daily E-Letter. More