The AMCU: What Platinum Investors Need to Know

South Africa produces roughly 70 percent of the world’s platinum, so it’s an important region for precious metals investors to watch. But more specifically, platinum investors should also be keeping an eye out for news from the country’s AMCU.
In addition to major producers such as Anglo American Platinum (JSE:AMS), Impala Platinum (JSE:IMP), Lonmin (LSE:LMI) and more recently, Sibanye Gold (NYSE:SBGL) the Association of Mineworkers and Construction Union (AMCU) has had a significant impact on the platinum market over the years.
That’s because while the National Union of Mineworkers (NUM) is still strong in South Africa, the AMCU has become the major trade union at many platinum mines in the country. For example, it’s been noted that the AMCU represents up to 70 percent of lower-level workers at Lonmin, while the NUM is only responsible for about 20 percent. The AMCU also represents workers at mines focused on other commodities, such as gold and coal.

Here’s a very brief overview of the AMCU and what investors need to know about the union.

When was the AMCU formed?

As per a detailed history of the union from South African History Online, the AMCU was formed in 1998 following a strike at Douglas Colliery, owned by BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT). It was a break-off faction from the NUM, and was officially registered as a union in 2001. The AMCU insists that it remains apolitical.
Joseph Mathunjwa, who led the strike at BHP and was subsequently ousted from NUM, was asked to form a union and is still currently head of the AMCU. Notably, he convinced management at BHP to implement a bonus system for underground workers and admonished management at the mine to take responsibility when a worker died.
However, it wasn’t until 2008 that the AMCU started recruiting workers from platinum mines in the Rustenburg area. Since then, the union has continued to make a dent in NUM ranks, attracting workers who are not satisfied with that union.

2014 platinum mine worker strikes

As part of its mandate to protect workers, neither the AMCU nor NUM are strangers to organizing strikes in order to fight for better rights for their members. In October 2015, 30,000 NUM workers went on strike at coal mines in South Africa, while Sibanye Gold recently avoided an AMCU strike at its gold operations by striking a wage deal with the union.
However, the AMCU-led strike at platinum-group metals mines in South Africa in 2014 illustrates just how much weight the union has to throw around. The strike dragged on for five months before officially coming to an end in June 2014. The AMCU had originally demanded wages be raised by roughly 150 percent, but it ended up accepting a more modest rate increase.
When all was said and done, Amplats, Implats and Lonmin lost over $2 billion in revenue due to the strike, while workers lost almost $1 billion in unpaid wages. The companies were still ramping up production and recovering from the strike well into 2015.
Colen Garrow, an economist at Lefika Securities, recently told IOL beta that such strikes damaged the broader South African economy and hurt investor sentiment.

What does the AMCU mean for the platinum market?

Certainly, halting platinum production in the world’s largest platinum-producing country for five months put a damper on supply in 2014. However, the platinum price didn’t react as strongly as expected to the supply crunch. Spot platinum rose roughly 7.36 percent between the start of 2014 and June 23, when the strike ended, but fell 32 percent, or $470, between then and November 2015 as platinum producers in the country continued to ramp up production.
Still, for mining investors, it’s worth keeping an eye on what the AMCU is up to, as the union does have the potential to make major changes in the industry. 
Platinum prices have rallied since the start of 2016, gaining 14 percent year-to-date.
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Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
This article was originally published on November 11 2015.