If Detroit doesn’t build cars, then there is little market for catalytic converters. And if there is a falling market for those pollution-control devices, there is a falling market for the platinum and palladium that go into the converters. That domino theory struck Stillwater Mining (NYSE:SWC) yesterday and it looks like it is about to strike it even harder today.
The company announced yesterday that it would lay off all 526 employeesat one of its mining operations in south central Montana. Permanentcuts will total about 320 full-time staff and 50 contractors, about 21%of Stillwater’s 1,770 Montana employees. A drop of 60% in the prices ofplatinum and palladium are getting the blame for the layoffs.
According to the Billings Gazette,Sweet Grass County, where the mine is located, will lose about 40% ofits property tax revenue if the mine is shut down completely.Neighboring Stillwater County would lose a third of its tax revenue ifa second mine in that county is shuttered.
Stillwater Mining is majority-owned by a subsidiary of Norilsk Nickel,a huge Russian mining company that controls about 50% of the world’ssupply of palladium. The company reports third quarter earnings latertoday, but don’t expect any good news. Shares closed at $2.25yesterday, down about 90% from 52-week highs.
The news out of Montana demonstrates just how pervasive the autoindustry is to the overall US economy. If the auto makers fail, therewill be more than just a ripple effect. It will be more like a tsunami.
Paul Ausick
November 19, 2008
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