Johannesburg — A political storm is brewing in South Africa this week over the decision by Impala Platinum to eliminate 13,400 jobs over the next two years in a bid to cut costs and revive the price of the precious metal by trimming supply.

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The mining minister attacked the decision as "irresponsible" and the militant majority Associated Mineworkers' and Construction Union has threatened to close the platinum miner down with a strike.

Implats plans to cut a third of its workforce much faster than fellow platinum miner Sibanye-Stilwater plans to lose 12,600 jobs at its acquisition target Lonmin over the next three years. Implats will reduce its shafts to six from 10, reducing output from its Rustenburg operations to 500,000 oz/year from 750,000 oz. The first jobs will go next year.

"This will remove non-profitable production from an oversupplied market," the company said in a statement this week.

Implats' financial bosses said they had to act swiftly to reduce the company's cash burn. Yet the cutback in production is unlikely to solve the oversupply problem too soon. A survey by Johnson Matthey, published in May, says South Africa this year will contribute 4.4 million oz of the total 6 million oz in supply of platinum.

Gross demand for four applications -- auto catalysts, jewelry, industrial and investment -- is 7.76 million oz. About 2 million oz will be supplied through recycling. Net demand will be 5.73 million oz, the report states. That is why analysts in Johannesburg have put the over surplus in the market at about 350,000 oz.

Analysts also believe it will take an age for the platinum price to recover to between $1,200 and $1,300/oz -- a price that could boost profitability in the industry, compared with about $830 oz on Thursday.

Sibanye-Stilwater is banking on this happening within two years, but analysts believe the company may be lucky to see these kind of prices in the next five years, or even longer.

Implats will have to fight a rear-guard action against the political backlash provoked by the job losses announcement.

AMCU said Monday that all gloves were off and that it would take Implats down with a strike if it did not reconsider the job cuts.

"We will even apply for a secondary strike at other Impala operations to make sure that no single ounce of platinum comes up from the ground, Joseph Mathunjwa, the head of AMCU, said. "Whoever has a business relationship with Impala will be affected."

The AMCU, the majority platinum industry union, may not be as militant as it was when it closed the entire industry with a five-month wildcat strike back in 2014, but for Implats to ignore its saber rattling is at its peril. The National Union of Mineworkers, the biggest union in South Africa, said this week it will also fight the Impala job losses. The company countered that any industrial action could cost even more jobs.

Politically it could be even more dicey. Mining minister Gwede Mantashe has also attacked the job losses.

"My view is that it's irresponsible to say you'll retrench 13,000 people over the next two years," Mantashe said August 4. "You're being casual about the serious activity of terminating the employment of many people, you're refusing to think ahead and mitigate for many people."

The South African government takes a very dim view of the mining industry right now and, with an election looming next year, it is keen to be seen to be bringing it into line. More than 24 years into South African democracy, mining is still seen in political circles as the exploitative industry that formerly propped up the country's apartheid system.

All of this political and labor pressure is likely to make a difficult bid by Implats of cutting costs and platinum supply even more difficult.

--Chris Bishop, newsdesk@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com