One week ago a 5-month strike by platinum miners was declared over with miners returning to work after accepting a wage deal. During that 5-month period platinum prices ended level at $1,457 per oz. The muted response to the loss of output due to high global stockpiles as producers and consumers stocked up prior to the beginning of the strike. Now platinum prices, far from falling with market participants relieved that the strike has finished hit a 10-month high yesterday (Tuesday 1 July) of $1,511 per oz, up almost 4% over the past week. What’s going on?
Related article: Global stockpile weighs on platinum prices despite strike
Despite the end of the strike there are concerns that the endemic problems highlighted by the platinum strike are not going to go away and that consolidation among the South Africa producers was “inevitable” – the likely result being more labour unrest. These fears resurfaced with a vengeance after members of South Africa’s largest union NUMSA said members could down tools in a wildcat strike at state-power utility Eskom, while more than 220,000 South African engineering and metal workers launched a strike. An unexpected increase in US car sales in June also bolstered investor interest in platinum. The metal widely used in catalytic converters accounts for 38% of platinum demand.
Another factor behind the rise in the platinum price has been renewed conflict between Ukraine and pro-Russian separatists. The fighting renewed concerns that Russia’s exports of platinum could be disrupted. The European Union has threatened to impose a third round of sanctions against Moscow unless Russia uses its influence to end the violence. Russia is the world’s second-largest producer of platinum.
Finally, with gold prices at a 3-month high on geopolitical concerns platinum has also seen increased demand as a safe haven and hedge against uncertainty.
Related article: Platinum prices to average $1,850 per oz in 2015 – HSBC