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Platinum Hits Two-Month High as South Africa Strike Looms

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01/22/2014 | 08:07pm CET

--Platinum for April delivery rises 0.6% to $1,462.40 a troy ounce

--Strikes scheduled to start on Thursday at South Africa's biggest platinum mining companies

   By Matt Day 

NEW YORK--Platinum climbed to the highest price in more than two months ahead of a planned strike in South Africa that may interrupt production in the top producer of the precious metal.

Platinum for April delivery, the most actively traded contract, rose $8.90, or 0.6%, to settle at $1,462.40 a troy ounce on the New York Mercantile Exchange, the highest since Nov. 6. Palladium, produced in South Africa as a byproduct of platinum mining, also settled at a two-month high. Palladium for March delivery edged up 0.1% to $748.85 a troy ounce.

The Association of Mineworkers and Construction Union, which represents most of South Africa's platinum miners, plans to launch an open-ended strike on Thursday. The union is requesting pay increases for members to compensate for increased living costs, which they say are rising faster than salaries.

"If this strike does continue, you could get an extreme market reaction" should investors anticipate another supply squeeze, said Peter Hug, director of trading with bullion dealer Kitco Metals Inc. in Montreal. Mr. Hug said he doesn't anticipate a lengthy strike, but platinum and palladium prices are likely to be supported "as long as that remains a possibility."

Anglo American Platinum (AMS.JO), Impala Platinum (IMP.JO) and Lonmin PLC (>> Lonmin Plc), targets of the planned strike and the three largest platinum mining companies by output, in a statement this week called the union's wage demands unrealistic.

Investors have focused on the risk of supply shortfalls since an August 2012 strike at Lonmin's Marikana mine resulted in clashes with police and left dozens dead. The crisis sparked rolling strikes through South Africa's mining industry, cutting the country's platinum output by 16% that year.

South Africa last year accounted for about 72% of global platinum production, according to major precious metals consumer Johnson Matthey PLC, and 37% of palladium output.

Platinum prices may rise this year even if a long South African strike doesn't materialize, analysts with Macquarie Bank said in a report on Wednesday. The investment bank projects platinum demand to rise by 2.8% amid reinvigorated global auto sales, helping push prices to $1,600 an ounce by the end of the year. Platinum and palladium are used chiefly in catalytic converters, which scrub emissions from automobile exhaust.

"Demand should even rise in Europe, whose car market has shrunk in recent years," Macquarie analysts said.

--Devon Maylie contributed to this article

Write to Matt Day at [email protected]

Stocks mentioned in the article : Lonmin Plc
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