I have blogged many times about the critical deterioration of Eskom’s power grid in South Africa.
The country for the first time implemented “level six” cutbacks creating social hardship and business challenges.
Unfortunately with mismanagement, corruption and neglect, the South African grid is a disaster, bearing no resemblance to Eskom’s once world class system.
Needless to say the utility has enormous debt that will ultimately be downgraded to junk by both Moody’s & Standard & Poor’s, forcing liquidations and complicating funding for solutions. And of course any set of solutions is a longterm project.
Power cutbacks will reduce production of the platinum group metals, notably platinum, palladium, rhodium, iridium and ruthenium, that are all very small markets and already in tight supply or in deficit. South Africa is the world’s largest producer of platinum.
These markets in my view are already on the verge of explosive moves higher and I expect over time, will be catapulted further by the power situation.
While a company like Sibanye Stillwater (SBGL) is the world’s largest platinum, rhodium and ruthenium producer and 2nd largest in palladium, most of its palladium and rhodium is mined in Stillwater, Montana, where production, of course, will not be impacted.
In my view higher metal prices will offset production losses for SBGL though it does not resolve the hardships the South African people unfortunately are forced to face.