Don’t let platinum’s recent rise fool you

Don’t let platinum’s recent rise fool you

The 132,2% year-on-year rise in platinum group metal (PGM) production in March 2015 pushed overall mining production up by 18,8%, the second highest year-on-year increase since January 1980. It would be tempting to celebrate in response to the pronounced rise in PGM production, but a closer look at the data tells a more sober story.

The extent of the rise is largely a result of what economists term the “base effect”. The base effect describes the impact that abnormally high or low levels (in this case, levels of production) in a base month have on percentage change figures when compared with the most recent month.

Consider the chart below. PGM output peaked in December 2010 with a production index of 130,6, the highest monthly production level on record since January 1980. Industrial action interrupted production in February 2012. In August of that year, the tragic events at Marikana drew world-wide attention. A 5-month-long strike in 2014 resulted in a rapid fall in PGM production, pushing the index down to 45,2 in May.



The year-on-year figure of 132,2% published in Stats SA’s latest Mining: Production and sales release represents the change in the production index between March 2014 and March 2015. An abnormally low index of 47,8 was recorded for March 2014, as a result of the 5-month-long strike. A recovery in production, after industrial action ended in June, saw the index rise to 111,0 in March 2015. The 132,2% increase seems incredible, but this is because the March 2014 index – which was used as the base to calculate the percentage change – is unusually low.

As can be seen in the chart, PGM production still has some way to go before it reaches the production highs experienced in 2010. With a stagnant platinum price and current concerns over job losses in the industry, only time will tell whether, or when, this will occur.

Other results from the Mining: Production and sales, March 2015 release:

  • Seasonally adjusted mining production increased by 7,1% in March 2015 compared with February 2015.
  • Seasonally adjusted mining production increased by 1,9% in the first quarter of 2015 compared with the previous quarter.

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