Will South African platinum output climb on price jumps?

Platinum output in dominant producer South Africa is due to rise next year as delayed expansions kick in, but analysts are divided on whether record-setting prices will quickly fuel even more supply.
Platinum prices, which surged to the highest levels in more than 25 years this week on speculative buying, have been partly pushed up in recent years by the trimming of expansion plans by South African producers, helping prolong a market deficit. But the metal's rally coupled with a turnaround in currency in South Africa - where around three quarters of platinum is mined - are prompting a major rethink, according to some.
"I think the expansion in South Africa is potentially quite aggressive and quite fast," said analyst Leon Esterhuizen at Investec Securities in Johannesburg. "There's still a fair amount of easy pickings, open-pit type material, expansions in terms of brownfields."
The world's biggest producer Anglo Platinum, has been muted in its public response to higher prices, but some expansion decisions have probably already been taken behind the scenes, Esterhuizen said.
After having to embarrassingly cut back on ambitious growth plans over the past few years, expansion decisions are not likely to be made public until the last minute, he said.
The price of platinum, mainly used in jewellery and auto catalysts to clean exhaust fumes, has gained around 10 percent this year. In South Africa, however, the local price has shot up by 30 percent as the rand weakened against the dollar.
Over the previous two years, a strengthening of the rand slashed export income and weakened the viability of many projects, forcing them to be put on ice.
The eastern limb of the Bushveld complex, where many projects have been delayed, could now be a major growth area. The Bushveld complex is the world's biggest source of platinum group metals (PGMs).
"The infrastructural investment there has been quite aggressive, quite extensive and has been completely under-utilised," Esterhuizen said.
Bruce Alway, senior analyst at GFMS consultants in London, agrees that South African supply will expand next year, but much of that extra production was delayed due to technical reasons, not because of low prices.
He expects global mine supply to rise 2.5 percent to 6.5 million ounces this year from 6.34 million ounces in 2004, but then surge by 12 percent to 7.29 million ounces in 2006.
"If the basket (price of PGMs) remains where it is then clearly there is scope to develop some of the mines that have been on the back burner for a while, but let's not be carried away about what is likely to be the rate of increase," the analyst said.