In depressed platinum market, Amplats struggles to go solo

* Amplats expands London and Singapore sales teams

* Targets trading houses, end-users to sell metal directly

* Buyers say it lacks infrastructure, supply chain expertise

By Clara Denina and Silvia Antonioli

LONDON, Oct 1 (Reuters) - Less than a year after tearing up a $57 million annual supply contract with its main buyer, Anglo American Platinum is struggling to implement a new strategy of selling directly to end-users against a backdrop of weak prices, sources say.

The world's top platinum producer, known as Amplats , late last year ended a long-standing deal through which it had sold the bulk of its output at a discount to refiner Johnson Matthey (LSE: JMAT.L - news) , in exchange for marketing.

The idea was to make more money by cutting out the middleman, going direct to traders and carmakers and seizing profit opportunities by financing or lending metal and arbitraging different locations and grades.

To achieve that, the company, which mines platinum in South Africa and Zimbabwe, expanded marketing and sales teams in London and Singapore.

Amplats' parent company Anglo American (LSE: AAL.L - news) , whose portfolio spans iron ore, thermal coal, nickel and copper, is also undergoing a big overhaul as it tries to improve returns after years of underperformance compared with its peers.

It has made a series of high-ranking personnel changes within its wider commercial department, hoping to boost the division's earnings by $400 million by 2016.

But market sources say Amplats' plan to lure platinum business away from brokers and banks, which could shake up a market worth $5.4 billion a year, is proving hard to put into practice.

"Anglo's new chiefs have this bee in their bonnet that banks are scalping margins from them and their business and by setting up their own trading organization they can get a better average price for their metals," a banking source said.

"The expectation on what they can get from it is too high, especially at a time when the market is really weak."

Prices of platinum, used in jewellery and autocatalysts, have fallen 7.3 percent so far this year and are at a level that producers say barely covers the cost of mining.

HOBBLED BY STRIKE

On top of that, an unprecedented five-month labour strike in top producer South Africa saw Amplats lose about 40 percent of its mined output and register an almost 90-percent fall in earnings in the first half of this year.

"Look at the financial performance, at the always-possible force majeure due to strikes and the fact that they terminated a huge contract with a company they did business with for decades, that is a reason why (end users are reluctant to deal with them directly)," a German trader close to the car industry said.

Declaring force majeure means a company can get out of contract obligations in case of an unpredictable event beyond its control.

Amplats says it has more than offset the reduction in the amount of metal it sells to Johnson Matthey through the acquisition of new customers, including some in the automotive industry, but declined to provide details.

"We have been selling platinum to our customers for many years, independent of the previous relationship with Johnson Matthey," a spokesman for the company said.

Industry sources said the company lacks the right infrastructure to deal with plenty of new smaller accounts, which means having to ship the metal to many different delivery points and oversee payments from potentially riskier counterparties. Also, Amplats has little experience in the industrial supply chain, they said.

One source at a London trading house said Amplats' exposure to politically unstable countries such as Zimbabwe deterred his firm from buying its platinum directly. The lack of an established credit relationship between the trading house and Amplats was also a source of concern.

Analysts say producers are more prone to declaring force majeure in the face of supply disruptions, while market middlemen can rely on more than one supplier.

"The problem is that Johnson Matthey were not simply a conduit or a go-between, but they would provide some level of quasi-banking arrangements, in terms of stock holdings for example," Ross Norman, CEO of bullion broker Sharps Pixley said.

"Anglo Platinum is looking to do in months what Johnson Matthey took decades to achieve, which is approval at the industrial end," he said in an interview with Reuters.

Sources said Amplats has been replacing long-term contracts with carmakers with shorter-term arrangements based on the London spot price.

Long-standing customers of Amplats include Japanese carmakers Toyota Motor Corp and Honda Corp, German refiners Heraeus and BASF and Japanese trading house Tanaka among others, it shows on its website.

At the moment, Amplats itself seems to be the main victim of this new strategy to expand its sales business, sources said. But if the company succeeds, some brokers may be cut out of the platinum business and end-users like car companies may end up paying higher premiums in return for long-term supply contracts.

"Their idea of selling directly is not paying off yet, but it may still come through once they have learned how to do it," one of the sources said. (Additional reporting by Jan Harvey in London and Yuka Obayashi in Tokyo; editing by Veronica Brown and Keiron Henderson)