Gold prices could be affected if South Africa's mining union strikes

Troubled times are on the horizon for the gold mining sector as South Africa’s Association of Mineworkers and Construction Union (AMCU) is threatening to strike if its rival union and gold mining companies impose a wage deal to its members.

Earlier this week, AMCU president Joseph Mathunjwa told a crowd of workers in Johannesburg: “If NUM (National Union of Mineworkers) and Chamber of Mines want to extend their deal to us, we will sit down, whether it’s legal or not. We will strike.”

According to Reuters, the hardline AMCU union is demanding a more than doubling of wages from gold companies AngloGold Ashanti, Sibanye Gold, Harmony Gold and Pan African Resource’s Evander Mines.

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Wage talks are set to begin this month as the previous two-year pay agreement expires at the end of June.

“I’ve been saving money to sustain my family for months if we go on strike and it looks we are going to go strike,” Joseph Mpele, a 32-year-old underground miner for Sibanye Gold, said outside the stadium.

“I’m prepared and ready to stay away from work for even longer than my platinum comrades last year. What’s the point of going back to work when I’m not happy with my pay?”

With 54 percent of members in the gold mining sector, NUM is demanding an 84 percent increase in wages for its members. The union is struggling to retain control of the gold sector after it lost the top spot to AMCU in the platinum industry.

The AMCU, which has 29 percent of the workforce in the gold sector, is the same union that led a five-month strike last year that paralyzed the country’s platinum industry. 

Commodity analysts will be watching the progress of the negotiations closely.

“The AMCU has already threatened a strike if it is left out of negotiations and a new agreement is concluded,” an analyst for Commerzbank said. “South Africa’s importance in terms of gold has been diminishing for years, however. Last year, the country was the world’s sixth-largest gold producer with 145 tons, which equates to 4.9 percent of global mining production according to the WBMS. Nonetheless, a prolonged strike could have an impact on supply and prices.”

Because gold is all about demand, it could also boost gold prices.

“Any kind of supply disruption is always going to be supportive for gold prices,” said Frank Lesh, a trader at FuturePath Trading. “On the other hand, the gold market is more about demand than it is about supply and this is really sort of minor in the long term because there is enough gold out there to go around.

“It’s important, but marginally so,” he added.

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