Froneman: PGM price weakness during 2023 signal no structural change
While the operating environment remains challenging, with macro-economic and geo-political uncertainty persisting, Sibanye-Stillwater medium to long term view on the fundamental outlook for the metals we produce with the exception of nickel, remains largely unchanged.
Neal Froneman, Chief Executive Of Sibanye-Stillwater said: “We are confident that the PGM price weakness during 2023 does not signal a structural change in PGM fundamentals like that of the nickel market, but is more temporary in nature and we are beginning to see increasing signs which support a better demand outlook. We believe that the precipitous decline in PGM prices during H1 2023, was due to a confluence of negative factors and exacerbated by unexpected destocking of inventory which caught the market by surprise, causing increased uncertainty and market anxiety. This bearish sentiment was reflected in a significant build-up of speculative short positions in palladium, which also contributed to the price pressure.
We remain constructive on the outlook for lithium as well, despite current oversupply and the collapse in lithium prices.
We see increasing evidence that permitting and financing new mine supply is becoming more challenging and costly. As such we remain confident that we have timed our lithium strategy well and will be suitably positioned to deliver into a growing deficit market in the latter part of this decade.
Despite this relatively sanguine view on future metal prices, we are not ignorant of the risks posed by a potential extended downturn, and have already taken proactive and decisive actions, which tangibly address financial losses and better position the business for sustainability.
Our repositioning for a changing and less supportive environment began in 2021, aligned with our revised strategy, which was informed by the grey elephants (highly probable, high impact and yet ignored threats) we identified at the time.
The initial repositioning commenced in mid-2022 in anticipation of a deteriorating operating environment and palladium price outlook, with the US PGM operations repositioned for the high inflation environment, by suspending capital expenditure on further growth and a refocus on improving operational flexibility and efficiency and reducing costs.
The significant further decline in palladium and rhodium prices during 2023, was larger than we had anticipated, prompting a Group wide review of all operations and a focus on bottom of the cycle austerity and value preservation.
The identification and decisive implementation of cost saving and capital preservation opportunities during 2023 and 2024 to date, is expected to yield approximately R6.6 billion (US$375 million) in cost and capital savings (aiming at resetting the cost base) and capital reduction and/or deferrals, which will benefit near and medium term cash flow.
