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* 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 upa $57 million annual supply contract with its main buyer, AngloAmerican Platinum is struggling to implement a new strategy ofselling 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 throughwhich it had sold the bulk of its output at a discount torefiner Johnson Matthey, in exchange for marketing.
The idea was to make more money by cutting out themiddleman, going direct to traders and carmakers and seizingprofit opportunities by financing or lending metal andarbitraging different locations and grades.
To achieve that, the company, which mines platinum in SouthAfrica and Zimbabwe, expanded marketing and sales teams inLondon and Singapore.
Amplats' parent company Anglo American, whoseportfolio spans iron ore, thermal coal, nickel and copper, isalso undergoing a big overhaul as it tries to improve returnsafter years of underperformance compared with its peers.
It has made a series of high-ranking personnel changeswithin its wider commercial department, hoping to boost thedivision's earnings by $400 million by 2016.
But market sources say Amplats' plan to lure platinumbusiness away from brokers and banks, which could shake up amarket worth $5.4 billion a year, is proving hard to put intopractice.
"Anglo's new chiefs have this bee in their bonnet that banksare scalping margins from them and their business and by settingup their own trading organization they can get a better averageprice 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 andautocatalysts, have fallen 7.3 percent so far this year and areat a level that producers say barely covers the cost of mining.
HOBBLED BY STRIKE
On top of that, an unprecedented five-month labour strike intop producer South Africa saw Amplats lose about 40 percent ofits mined output and register an almost 90-percent fall inearnings in the first half of this year.
"Look at the financial performance, at the always-possibleforce majeure due to strikes and the fact that they terminated ahuge contract with a company they did business with for decades,that is a reason why (end users are reluctant to deal with themdirectly)," a German trader close to the car industry said.
Declaring force majeure means a company can get out ofcontract obligations in case of an unpredictable event beyondits control.
Amplats says it has more than offset the reduction in theamount of metal it sells to Johnson Matthey through theacquisition of new customers, including some in the automotiveindustry, but declined to provide details.
"We have been selling platinum to our customers for manyyears, independent of the previous relationship with JohnsonMatthey," a spokesman for the company said.
Industry sources said the company lacks the rightinfrastructure to deal with plenty of new smaller accounts,which means having to ship the metal to many different deliverypoints and oversee payments from potentially riskiercounterparties. Also, Amplats has little experience in theindustrial supply chain, they said.
One source at a London trading house said Amplats' exposureto politically unstable countries such as Zimbabwe deterred hisfirm from buying its platinum directly. The lack of anestablished credit relationship between the trading house andAmplats was also a source of concern.
Analysts say producers are more prone to declaring forcemajeure in the face of supply disruptions, while marketmiddlemen can rely on more than one supplier.
"The problem is that Johnson Matthey were not simply aconduit or a go-between, but they would provide some level ofquasi-banking arrangements, in terms of stock holdings forexample," Ross Norman, CEO of bullion broker Sharps Pixley said.
"Anglo Platinum is looking to do in months what JohnsonMatthey took decades to achieve, which is approval at theindustrial end," he said in an interview with Reuters.
Sources said Amplats has been replacing long-term contractswith carmakers with shorter-term arrangements based on theLondon spot price.
Long-standing customers of Amplats include Japanesecarmakers Toyota Motor Corp and Honda Corp,German refiners Heraeus and BASF and Japanese trading houseTanaka among others, it shows on its website.
At the moment, Amplats itself seems to be the main victim ofthis new strategy to expand its sales business, sources said.But if the company succeeds, some brokers may be cut out of theplatinum business and end-users like car companies may end uppaying higher premiums in return for long-term supply contracts.
"Their idea of selling directly is not paying off yet, butit 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 Obayashiin Tokyo; editing by Veronica Brown and Keiron Henderson)
