LONDON (Reuters) - Amplats, the world's top platinum producer, has expanded its marketing and sales teams in Singapore and London as part of a new strategy of selling directly to end-users against a backdrop of weak prices, sources say.
Late last year Amplats ended a long-standing deal through which it had sold the bulk of its output at a discount to refiner Johnson Matthey, in exchange for marketing.
The idea was to make more money by cutting out the middleman, going direct to traders and carmakers and seizing profit opportunities by financing or lending metal and arbitraging different locations and grades.
Amplats' parent company Anglo American, whose portfolio spans iron ore, thermal coal, nickel and copper, is also undergoing a big overhaul as it tries to improve returns after years of underperformance compared with its peers. It has made a series of high-ranking personnel changes within its wider commercial department, hoping to boost the division's earnings by US$400 million by 2016.
But market sources say Amplats' plan to lure platinum business away from brokers and banks, which could shake up a market worth US$5.4 billion a year, is proving hard to put into practice.
"Anglo's new chiefs have this bee in their bonnet that banks are scalping margins from them and their business and by setting up their own trading organization they can get a better average price for their metals," a banking source said. "The expectation on what they can get from it is too high, especially at a time when the market is really weak."
Prices of platinum, used in jewellery and autocatalysts, have fallen 7.3 per cent so far this year and are at a level that producers say barely covers the cost of mining.
On top of that, an unprecedented five-month labour strike in top producer South Africa saw Amplats lose about 40 per cent of its mined output and register an almost 90-per cent fall in earnings in the first half of this year.
At the moment, Amplats itself seems to be the main victim of this new strategy to expand its sales business, sources said. But if the company succeeds, some brokers may be cut out of the platinum business and end-users like car companies may end up paying higher premiums in return for long-term supply contracts.