Global mine output of platinum and palladium was lower during 2008 with further declines likely this year.

In its annual report on the world’s platinum and palladium markets, precious metals consultancy GFMS says platinum output declined by 7% in 2008 and palladium by 10%.

The ‘Platinum & Palladium Survey 2009’ stated that much of platinum’s fall was ascribed to South Africa’s 8% drop, where production was adversely affected by, among other factors, the country’s energy crisis and serious flooding and subsequent temporary closure of the Amandelbult mine.

A near 10% drop in output from Russia , led by disappointing production from its largest producer Norilsk Nickel, compounded the decline.

Increases in supply from Canada and Zimbabwe of 11% and 6% respectively, served to somewhat offset these losses.

The survey details how the onus of the 10% drop in palladium production fell in broadly equal measure on Russia and South Africa .

In Russia , which generated more than 40% of the world’s palladium in 2008, a decline in output of just over 10% was due to a number of factors, including extreme weather and plant maintenance downtime at Norilsk Nickel’s properties.

South African production fell by 12%, hampered by losses at some of the country’s biggest mines, notably Impala.

Canadian supply was severely affected by the collapse in prices which led to closure of the country’s leading palladium mine, Lac des Iles, in October.

GFMS says in 2008 platinum miners’ total cash costs expanded by a little over 30% in US dollar terms. The report’s cost analysis is based on a platinum equivalent ounce basis in order to facilitate a like-for-like comparison between operations. Cost increases were primarily attributed to the industry’s high proportion of fixed costs coupled with lower metal production.

Turning to the 2009 outlook for platinum and palladium mine supply, the report notes that a broadly neutral outcome is expected in South Africa this year for platinum.

Losses originating from the closure or downsizing of operations are expected to prevail, although these should be largely mitigated by a handful of greenfield project starts and in select cases a return to more normal operations following non-recurring events last year.

The view for other regions is broadly negative. Declines are expected in Russia , the United States and in Canada where the closure of Lac des Iles and, to a lesser extent, the temporary suspension of Vale Inco’s operations in Sudbury will create a meaningful shortfall. GFMS points out that in all three cases this will have a more pronounced impact on palladium supply.

www.gfms.co.uk