S.African power crisis dims mining sector outlook

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Platinum, used for jewellery and auto-catalysts, has hit successive record highs as the deepening power crisis in South Africa has forced bullion producers to forecast lower output and encouraged investors to snap up the metal.

Platinum hit a record high of $2,025 on Thursday before falling back to $1,982/1,990 an ounce.

State utility Eskom ESCJ.UL cut supply to miners by 10 percent last month after mines fell silent for five days when the power shortage ballooned into a national emergency.

Analysts say the impact on platinum of the power crisis in the country, the world's primary source of the metal and also a major gold producer, could be dramatic.

The global platinum deficit could almost double by the end of 2008, compared with a gap of about 265,000 ounces in 2007 on the back of safety-related mine closures, they say. The platinum market had a surplus of 65,000 ounces in 2006.

"For platinum, where some 80 percent comes from one country, the power problem will mean we have a sizeable deficit this year," analyst Robin Bahr at UBS Investment Bank in London said.

"Our estimate has been for a deficit of 330,000 ounces. That's likely to widen factoring-in the new numbers that have come out this week; we could see a deficit of around 400,000 or 500,000 ounces, but we still need to fine-tune our estimates."

SHORTFALL

The deficit is likely to push prices even higher, and a price-induced rationing would kick in to choke off some demand. Jewellery demand may fall off in the short term, analysts say.

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