Bad news for the South African platinum sector, which produces about 80% of the world’s platinum. A sharp drop in capital investment beginning in 2008 (when it was an annual $3 billion) and stretching into 2015 (when it was an annual $1 billion) has hit platinum output hard. Projecting from capital spending, the World Platinum Investment Council calculates that South African output will be below 2015 levels in 2016 and 2017. That would produce ongoing deficits in global supply in those two years. The forecast is for a deficit of 445,000 troy ounces in 2015—which is actually better than the deficit of 785,000 ounces in 2014. The improvement in the supply/demand deficit from 2014 is a result of the end of strikes that decimated production in South African in 2014. Supply is forecast to rise by 9% in 2015 to 7.9 million ounces thanks to the end of the strikes. Demand is forecast to climb 4% to 8.4 million ounces in 2015. But thanks to continued labor unrest in South Africa and the fall off in investment in South Africa’s aging deep shaft mines, the industry is unlikely to see a repeat of the big 2015 increase in supply Eventually that will result in an increase in the price of platinum, which hit a six-year low in August after falling 17% in 2015. The low price for platinum has resulted in a pickup in investment demand from Japanese investors, who buy bar platinum, and from exchange traded funds. My thesis since I added Stillwater Mining (SWC), the only North American miner of platinum/palladium metals, to my Jubak’s Picks portfolio is that South African’s pain would be Stillwater’s gain. That hasn’t worked out very well in 2015 as Stillwater—down 37.92% year to date—has tumbled to match the fall in a South African miner such as Impala Platinum Holdings (IMP:SJ)—down 37.95% for 2015 through September 9. But I think that the continued drop in South African production means Stillwater is likely to turn the corner as platinum and palladium prices gradually recover on the supply/demand deficit. (Shares of Stillwater held steady in August even as commodities in general fell on China growth fears.) The company actually increased capital spending by 9.7% in the second quarter of 2015 from the second quarter of 2014 and managed to take $7 a ounce out of its all-in sustaining costs in that period. Obviously any gain in Stillwater Mining shares depends on a recovery in platinum prices but with South African production continuing to lag, I think there’s a good chance of that happening in 2016. I’d call this stock a hold for patient investors with a target price of $12.50 a share, up from $9.15 on September 9, by September 2016. The shares are down 19.95% since I added them to my Jubak’s Picks portfolio on September 25, 2012.