Platinum prices remain muted despite no immediate end in sight to the South African strike, while palladium reached fresh highs on Russia-Ukraine worries. Among soft commodities, cocoa traded just off two-month lows while raw sugar and arabica coffee futures eased back
South Africa’s platinum strike continues after the country’s Association of Mineworkers and Construction Union (Amcu) said May 5 its members had rejected the latest wage offer by the world’s three biggest platinum producers.
The stoppage is now entering its sixteenth week and an estimated 600,000 ounce of platinum production have been lost since around 70,000 mine workers down tools in Jan. 23, according to this year’s Thomson Reuters GFMS Platinum and Palladium survey. A further 5,000 ounces of palladium is estimated to have been lost each day since the strike began.
The three producers – Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin -continue their direct approaches to employees. In a combined statement, the three companies said on May 5 that many of the strikers had expressed a desire to accept the offer and return to work but “were fearful of doing so due to threats to their personal safety”.
To date, the industrial dispute has cost striking workers some R7.52 billion ($716 million) in lost income and the three producers around R16.92 billion ($1.61 billion) in lost revenue, based on the three companies’ estimates.
Platinum price reaction to this latest failure to bring an end to the mine strike has been much as it has been throughout the 15-week dispute – muted. Spot platinum at $1,437 an ounce in London’s morning fix on May 8 is back below where it was before the strike started.
Spot prices spiked to a five-and-a-half-month high of $1,484 an ounce in early March after an earlier round of wage talks collapsed as well as on worries about Russian-Ukraine tensions. U.S. platinum futures have followed a similar path with July futures on the Comex division of the New York Mercantile Exchange (Nymex) settling at $1,434.80 an ounce on May 7, down $23.3 on the day.
The muted price reaction has been due largely to the platinum producers and fabricators stocking up ahead of the strike. However, prices are expected to climb later in 2014 as the impact of the strike starts to be felt, analysts say.
Restructuring is considered likely after the dust settles following a resolution to the dispute. Job losses are expected, particularly related to Amplats’ ailing Rustenburg operations, which the company has indicated it could sell off or mothball.
While the South African miners’ strike has been a supply concern for palladium, fears of a disruption to export flows of the metal from Russia amid escalating tensions over Ukraine has been the main driver of the metal’s climbing prices in recent weeks.
Worries over Russia’s involvement in Ukraine and the possible retaliation by Russia’s leadership to the imposition of U.S. and E.U. sanctions pushed spot platinum prices to $813 an ounce in mid-April, their highest since August 2011.
Last week, spot prices topped this earlier peak, hitting $815 an ounce on May 1. Since then spot prices climbed to $817 on May 6, on the escalating violence in Ukraine and the failure to reach a resolution in the South African mine strike.
Conciliatory comments from Russian President Vladimir Putin at midweek – though met with scepticism – helped ease tensions over Ukraine. Spot platinum was down at $803 an ounce in May 8’s London morning fix while Comex futures for June dipped to settle below $800 at $786.70 an ounce, more than $21 down on the day.
The escalating violence in Ukraine also helped support gold prices early in the week. The precious metal is typically seen as a safe-haven investment at a time of geopolitical turmoil.
Gold for June delivery on Comex on May 5 touched a session high of $1,309.40 an ounce , the highest since April 15, before settling at $1,309.30. However, like palladium, by mid-week gold was back below $1,300 to close at $1,288.90 an ounce on May 7 but still off the 10-week low of $1,277.60 touched on April 22.
Elsewhere in metals, copper edged down as weaker- than- expected economic data from China on May 5 re-stoked concern about the country’s demand for the metal. China typically accounts for some 40 percent of global copper consumption.
Benchmark three-month copper on the London Metal Exchange (LME) dipped to close at $6,658-6,660 a tonne on May 7.
HSBC’s Manufacturing PMI, released on May 5 and compiled by UK-based Markit Economics, showed that activity contracted for a fourth consecutive month in April, with an index reading for 48.1. This final figure was down marginally on the earlier ‘flash’ reading for April of 48.3 but up from 48.0 in March. China’s official manufacturing PMI, however, rose to 50.4 from March’s 50.3. A reading above 50 indicates expansion. However, the country’s official PMIs are understood to be weighted more towards the larger state-owned firms.
“The latest data implied that domestic demand contracted at a slower pace, but remained sluggish,” said Hongbin Qu, chief economist, China & co-head of Asian Economic Research at HSBC in a press release.
He said both the new export orders and employment sub-indices contracted, which indicates that the country’s manufacturing sector, and the broader economy as a whole continues to lose momentum.
Meanwhile, in oil markets, U.S. crude June futures nudged above $100 a barrel for the first time since April 29 to settle at $100.77 on Nymex at midweek after the U.S. government’s Energy Information Administration (EIA) reported a 1.8-million barrel drop in the country’s commercial crude stocks for the week ending May 2.
