LONDON (Commodity Online): With platinum prices currently around $1,420 an ounce, values are too low to encourage more production, said Barclays Capital in a briefing.

According to Barclays, by the first half of 2011, prices had risen above $1,500. However, the cost floor for South African producers has fallen back to levels seen in 2009 as the rand weakened versus the dollar. This favorable currency factor is likely to be temporary and core costs are still moving higher. There is a 25% increase in electricity rates agreed upon in 2012 and wage increases make up half of total costs.

“Costs have risen substantially since 2008 but the supply response may not be as responsive to costs (in 2008 capex budgets and a number of longer-term projects were curtailed due to lower prices) given the impact on production from an additional factor – the increase in the number of safety stoppages. Indeed, the latest production data from South Africa for October, although subject to revisions, reveals a drop in PGM output to its lowest since February 2010,” Barclays concluded.