Major Impact of South Africa's Energy Crisis on Future Supply of Platinum Group Metals

By Dr David Davies 

Please find our latest research report on the impact of South Africa’s energy crisis on Platinum Group Metals mine supply, by Dr David Davis (pdf report download below).

Having spent over 3 months working on this report, we trust the detail and proprietary data research in particular, will be of use to our readers. 

South Africa has faced ongoing periods of widespread rolling blackouts (load shedding) for many years and the future looks extremely bleak for Eskom, the national electricity utility provider.

In the worst-case scenario, the effect of this “energy crisis” is likely to be overwhelming and will undoubtedly have a crippling effect on South Africa’s economy, PGM mining activities and therefore the global supply of Platinum in particular, given that South Africa produces 72% of the world's Platinum, 36% Palladium and 82% Rhodium.

The critical concerns are:
 -   Disruptions to mining operations caused by higher electricity load shedding stages and more frequent load shedding will have an increasingly more severe impact on PGM production over the coming years.
 -   Load shedding at Stage 6 and above would mean that the miners would not go underground and operations would cease causing major PGM supply disruption.
-   The impact of a diminishing and intermittent electricity supply can be attributed to a worsening cauldron of political ideology, political interference, state capture, mismanagement, lack of skills, poor maintenance, unscheduled breakdowns, crime and corruption.
-   Mismanagement, cost constraints, the lack of skills and unscheduled breakdowns of the ageing coal-fired plants many of which are to be decommissioned.
-   New-builds of electricity capacity are likely to be late, exacerbating the energy crisis.
-   Considerable capital constraints to the energy recovery plan and lengthy delays, in part caused by corruption, will continue to hamper the procurement process.
-   Plans for emergency power ships are likely to be scuppered due to the disastrous ecological and environmental impact.
-   Prolonged industrial action, political upheaval, increasing costs and a significant reduction in capital expenditure. The PGM mining industry has been starved of expansion and ore reserve replacement capital for a number of years.  
In summary, the PGM supply from South Africa will almost certainly start to decline within the next 2 to 3 years when higher levels and frequency of load shedding persist; at the same time that industrial and investor demand for Platinum is forecast to dramatically increase.
The future demand for PGMs is all about climate change and the drive for net zero emissions by 2050.
The progressive tightening of environmental regulations and technology innovation surrounding the production of green hydrogen has led to and will continue to lead to, an increase in PGM demand. Coupled with the supply-side restraints, in part, caused by the energy crisis, this will almost certainly cause a major price resolution in Platinum.

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 CLICK HERE to download the report in full. 


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