Platinum: surplus to requirements - FT.com The odds are stacked against South Africa's platinum miners. The country's deep and dangerous mines are some of its prime assets but the cost of extraction is high, and rising. Labour is the biggest cost whilst the price of electricity has risen 25 per cent annually for the past three years. At least power supply is more stable and government-imposed safety stoppages seem to be abating. But the 430,000-ounce platinum surplus sitting on European motor industry shelves and in exchange traded funds has held back the price to about $1,470 an ounce. As cash flow falls, London-listed Aquarius Platinum, the fourth-largest producer by volume, has closed three mines and called on its larger rivals to cut production. The pressure is real, if not universal. At $7.8bn, the Bloomberg consensus estimate for full-year cash from operations at Anglo Platinum, the biggest producer, is nearly two-fifths lower than last year. At Impala Platinum it could be a third lower, and 55 per cent at Lonmin. Aquarius faces an acute 90 per cent fall. If Europe's motor industry remains depressed, platinum miners need to eliminate about 500,000oz, or 10 per cent, of capacity - maybe more. Impala, already at the low end of the cost curve, has less need to cut. Aquarius really needs Angloplat, still beset by high costs, to cut capacity. By dint of its mining presence in South Africa, parent Anglo American has less flexibility to cut, but can cross-subsidise Angloplat. Neither the government, which wants to promote beneficiation locally, nor the mining unions will accept further job losses. The industry's problems are priced in. Angloplat and Impala shares have lost 15 per cent and 20 per cent respectively over the past year, Lonmin two-fifths and Aquarius more than double that. Without a rebound among European carmakers, cost-cutting remains the most compelling catalyst for South Africa's platinum miners.