LONDON (Reuters) – Given that South Africa is the source of 75 percent of the world’s platinum supply, the fact that prices have responded so little to strike action there this year has surprised investors.
Prices barely reacted to news on Thursday that the hardline AMCU union had declared a wage dispute with Lonmin, raising the possibility of an industry-wide strike that could hit half of global output.
Five years ago, the threat of production cuts in South Africa was the primary force driving platinum prices to record highs at $2,290 an ounce. But times have changed. Even after last year’s deadly wildcat strikes, when more than 50 people were killed in the platinum sector, prices rose only briefly. The following quarter, they fell nearly 15 percent.
Earlier this year, a two-week strike at major producers Anglo American Platinum, which the company said cost it 44,000 ounces of lost output, was accompanied by a 2 percent drop in platinum prices.
“The strike at Amplats’ Rustenburg operations hardly moved the dial,” Investec analyst Marc Elliott said. “If widespread strike action evolves then it’s certainly supportive, but it will depend on if workers strike just for a week, or longer.”
“If strikes were to drag on, then prices will probably gather momentum. People might get a little bit nervous if nothing’s resolved within two weeks,” he said. “(But) I don’t get any sense that people will panic just yet.”
Standard Bank estimated this month that platinum inventories are equivalent to 1,019 days of consumption. That has helped cushion prices from even major supply and demand changes.
Absa Capital’s new platinum-backed exchange-traded fund in Johannesburg, for instance, has pulled in 770,000 ounces of metal since its launch in April, but prices have declined 5 percent in that period.
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