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PLATINUM WEEK-Platinum firms gear up for tough S.Africa wage talks

Kitco News

* Miners expect tough negotiations
* Higher basket price and weak rand help miners' profits
* Risk of strike remains high- analyst

By Tanisha Heiberg and Zandi Shabalala

JOHANNESBURG/LONDON, May 15 (Reuters) - The world's top platinum miners are bracing for a fresh round of negotiations with South African workers as a rise in producer profits is likely to provoke higher wage demands from labour unions including the militant AMCU.

Higher prices for palladium and rhodium and a weaker rand currency have boosted profits at miners such as Anglo American Platinum (Amplats), Sibanye-Stillwater, Impala Platinum and Lonmin after several years of losses.

This could embolden the Association of Mineworkers and Construction Union (AMCU), which last month ended a five-month strike at Sibanye's gold operations, to demand increases that outpace inflation. Talks are expected to begin in June.

"We expect another tough round of negotiations," Amplats spokeswoman Jana Marais said. "Our employees' disposable income has been under increasing pressure."

A five-month strike in 2014 by thousands of AMCU members at the Rustenburg operations of Amplats, Impala and Lonmin forced the companies to restructure and cut jobs.

But the strike, which cost the industry billions, failed to push platinum prices higher due to a supply glut that is expected to persist this year. AMCU, which could lose accreditation as a union for allegedly breaking labour laws, said during a press conference last month it had complied with rules about how unions should operate and was preparing for the platinum wage talks.

The AMCU is one of the largest unions in South Africa's mining sector and the majority worker's body in platinum.

"AMCU will continue its campaign of social justice and economic emancipation of the working class," AMCU President Joseph Mathunjwa said at the April conference. Firms argue that years of above inflation wage rises have eroded profit margins.

"Workers cannot be screaming for minimal profits for their pockets (otherwise) they will have no jobs in five years," Lonmin chief executive Ben Magara told Reuters in London.

AMCU, Solidarity and National Union of Mineworkers could not immediately comment.

Platinum firms paid around 48 billion rand ($3.4 billion) in wages to employees in 2018, according to data from the Minerals Council, but are facing headwinds from a carbon tax and higher electricity prices and power supply disruptions.

The sector, the largest mining employer, has seen a 16 percent decline in the number of workers to 167,835 in 2018 from a peak of 199,948 a decade ago.

Layoffs in the mining sector are a sensitive issue in a country where unemployment is running at 27%, but they are common in the industry, where some mines are unprofitable. The rise in profits is due to record high palladium prices and firmer rhodium prices. But the industry in South Africa produces less palladium than platinum.

Platinum prices around $850 an ounce are down nearly two-thirds since 2008, partly due to the Volkswagen emissions scandal in 2015.

"A strike is a big risk for PGM producers, especially those who have a majority AMCU membership. That remains a challenge, despite the higher basket price," said Nedbank equity analyst Arnold Van Graan.

($1 = 14.2195 rand)

(Reporting by Tanisha Heiberg and Zandi Shabalala; editing by Pratima Desai and Emelia Sithole-Matarise)

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