Platinum price still stable

Commodities , Metals , Platinum , Precious metals , South Africa Feb 24, 2014 No Comments

PlatinumDespite a recovery on the demand side and a major strike in South Africa, mining companies inventory is  preventing prices to risePlatinum futures for April delivery gained 0.9 percent to $1,441.40 an ounce which is a 5% increase since January 1st.

The strike in the platinum sector entered its fifth week on Monday as the Association of Mineworkers and Construction Union (Amcu) and platinum producers could not strike a deal. And yet, the price per ounce has hardly moved. After climbing to 1,490 dollars on January 20, three days before the beginning of the strike, he even declined rather, moving in a range between 1,379 and 1,454 dollars.

More than 70,000 workers at the world’s three largest platinum producers, Anglo American Platinum, Imapala Platinumm and Lonmin, have been on strike since January. A simultaneous strike at the three companies has never happened before, and the current action has hit over 40 percent of global supply. Amcu says it is willing to move on its R12,500 demand on condition that it negotiates directly with the companies CEOs. Talks to end the strike stalled after the platinum companies made their final offer of between seven and nine percent increase last week which was rebuked by the union.

One of the main reasons why the price of platinum does not take off while the current movement has stopped all activity at Lonmin and halved productions at Amplats and Implats, the two major producers, is  because the mining industry is better prepared than in 2012, when it was swept by a wave of rolling and violent illegal strikes. A spokesman for Impala Platinum said last month it had enough in inventories to supply clients for six to eight weeks.

“If strikes continue into May, we believe that mines may need to source metal from the open market, or fail to deliver on contracts,” a research note by Standard Bank argued on Friday. “While this may be bullish, we still believe the metal is available, it is just a question of at what price level holders of above-ground metal will part with their metal,” he added.

In the meantime, producers and consumers say there is plenty of platinum around to meet demand. That’s because of a slump at the number one customer for platinum – the European auto industry – and above ground stocks of as much as 4 million ounces of platinum. As the stockpiles begin to dwindle and the EU industry turns around, price could move higher, but a lot of ground still needs to be covered.

 

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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