Platinum production is being hindered by the current metal price basket of US$850/oz, it has been reported.

According to Mineweb, analysts at RBC Capital Markets believe that platinum production is largely unresponsive once the price drops below a certain level - and then deteriorates markedly when prices fall further.

"Once we dip below USD 1,100/oz, we find hardly any growth potential from the current 5 million ounces a year production base, and once the metal price basket dips below USD 1,000/oz, we see current output declining drastically," the company is quoted as saying by Mineweb.

Given the current price of platinum, RBC Capital Markets believes the platinum industry's production capacity is "hinging on a knife edge".

As such, reductions in output should be expected, although deep, hard-rock mining firms will not be as responsive as other mining operations to changes in prices and loss-making.

"These mines have outstanding capital commitments and very large labour forces that can not simply be made redundant every time metal price volatility delivers low metal prices," RBC Capital Markets confirmed.

In a Reuters interview on Wednesday (15th October), Neville Nicolau, Anglo Platinum's Chief Executive Officer, expressed his confidence that the price of platinum would increase to over $1,200/oz in the long term.

Sources:

A complete collapse in platinum sector profitability, 16/10/08

http://www.mineweb.co.za/mineweb/view/mineweb/en/page35?oid=70892&sn=Detail

Angloplat CEO sees metal price rebounding, 15/10/08

http://africa.reuters.com/business/news/usnJOE49E0M9.html