Labor peace in South African mines remove potential Platinum support

SOUTH AFRICA November 02 2016 11:13 AM

CAPE TOWN (Scrap Register): Labor peace in the South African platinum-mining sector takes away a potential bullish catalyst for prices of the metal, yet platinum may find investment buying anyway because it is already cheap compared to gold, said Mitsubishi. 

The wage talks had the potential to lift platinum group metals if there had been a strike, since this would have meant less supply and thus a tighter market. 

The conclusion of the wage deals removes the threat of widespread strikes in the PGM mining sector and therefore a potential element of price support for PGMs, Mitsubishi added.

When wage deals were reached in June 2014 after a five-month strike, platinum prices fell by close to $300 over the next five months, Mitsubishi points out. 

At the time, speculative gross long Nymex futures holdings by money managers was close to all-time highs of 3 million ounces but later sank to a two-year low of 2.2 million. 

“This time, the recent weakness in the platinum price and anticipation of a wage deal has already led many speculative longs to liquidate their holdings of platinum futures, but a further reduction in bullish positioning from here may still have negative implications for the price,” Mitsubishi noted. 

However, platinum still looks historically cheap both in absolute terms and compared with gold, at a 23% discount to the yellow metal. This may be enough to maintain some long investment interest.