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South Africa plans fuel cell plant to boost platinum demand

* Platinum price has tumbled, firms struggling

* Govt supporting fuel cell plant to increase demand

* Plant likely by 2018 - Isondo Precious Metals CEO

By Wendell Roelf

CAPE TOWN, Feb 9 (Reuters) - South Africa plans to set up a fuel cell component plant by 2018, the latest initiative from the world's top platinum producer to increase demand for the metal and support firms hit by plunging prices and labour strife.

The price of platinum has fallen about 30 percent year-on-year, forcing miners to sell assets and cut production and jobs. Around two-thirds of the industry, whose mines were damaged by a five-month strike in 2014, are making losses.

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Vinay Somera, chief executive of Isondo Precious Metals, said his firm was preparing a feasibility study and had secured a licence from U.S (Other OTC: UBGXF - news) -based Chemours Technology, to assemble components for the fuel cells using platinum.

Fuel cells generate electric power by combining hydrogen and oxygen over a catalyst such as platinum. The metal has so far mainly been used in catalysts to make diesel cars cleaner.

"We are looking to get manufacturing in the ground in the next one to two years," Somera told Reuters on the sidelines of an African mining conference in Cape Town.

Under the deal with Chemours (Berlin: 28467212.BE - news) , Isondo would manufacture, market and sell licensed fuel cell components globally.

Somera said a key advantage for his firm would be to bring the cost of the technology down by sourcing the metal locally. The government has also promised tax incentives for the manufacturing to take place in special economic zones, he said.

Rob Davies, the trade and industry minister, said at the conference his department was paying 15 million rand ($928,000) to fund part of the cost of the feasibility study.

"We want to establish this technology as something which builds into the platinum industry, supports and sustains an expansion and stabilization of the platinum industry," he said.

Somera said his firm was also looking at fuel cell stacks on gas pipelines in Nigeria and using micro-grid fuel cells for rural electrification across Africa.

The current market for fuel cells is around 15,000 to 20,000 ounces of platinum a year, with a projected outlook of 50,000 ounces plus beyond five years, Somera said.

Should the automotive sector adopt the technology, then only a shift by only a very small fraction of the world's fleet could lift demand. Fuel cell powered cars use between five and 10 times more platinum than a diesel catalytic converter, analysts say.

"The automotive sector is the holy grail," Somera said.

($1 = 16.1555 rand) (Editing by James Macharia)