Platinum and sister metal palladium spiked higher on supply worries triggered by further violence in South Africa’s platinum belt. U.S. crude oil futures moved up on a sharp fall in the country’s inventories while Brent found support on the escalating conflict in Libya. Among soft commodities, arabica coffee futures hit a six-week low on continuing Brazilian output uncertainties.
Palladium prices climbed further while platinum prices edged higher as the four-month miners’ strike in South Africa dragged on and renewed violence erupted. Last week, there were violent clashes in the country’s platinum belt between striking miners trying to prevent others returning to work, leading to four fatalities. At the time of writing, there were reports coming in of another mine worker death following renewed violence at the mines.
Fresh hope of a resolution to end the strike that has cost the three affected producers more than R19.1 billion ($1.8 billion) in lost revenue since 70,000 workers downed tools on Jan. 23 emerged early this week when the country’s Labour Court intervened.
The Labour Court is mediating fresh talks between Anglo American Platinum (Amplats), Impala Platinum (Implats), and Lonmin and the Association of Mineworkers and Construction Union (Amcu) in a bid to end the stalemate which has cost the producers more than R19.1 billion ($1.8 billion) in lost revenue. The mediation process which is set to last up to three days began May 21.
The strike has hit 40 percent of global platinum supply but prices of the pgm until recent days had been largely unmoved by the labour dispute given that the industry had managed to build up stocks ahead of the strike. But prices started to spike upwards since last week when they hit two-month highs amid the erupting violence.
On May 22, July platinum on the Comex division of the New York Mercantile Exchange (Nymex) touched $1,496.95 an ounce, its highest since early September 2013. The previous day the July contract had finished at $1,474.90 an ounce just a few dollars off the two-month high of $1,485.70 reached last week.
Analysts said the escalating violence is fuelling worries over supplies of both platinum and sister metal palladium.
Palladium continues to track upwards, posting fresh three-year peaks on Comex on May 21. South Africa is an important supplier of palladium to world markets, accounting for around 37 percent of global supply last year.
But until recently, it had been the tensions surrounding Russia’s involvement in Ukraine and worries over a potential disruption to supplies of palladium from the Russian Federation that had been the key factor in pushing palladium prices up to their highest since March 2011.
The launch of two new physical palladium-backed exchange traded funds in Johannesburg in March has also provided a big boost with holdings hitting record levels this week.
South Africa and Russia accounted for near 80 percent of world palladium supply last year, according to data from Johnson Matthey. In a report this week, the company said it expects the global palladium shortfall to increase to 1.61 million ounces this year from 371,000 ounces in 2013, marking the eighth year of deficit. Johnson Matthey expects the platinum deficit to widen to 1.218 million ounces in 2014.
June palladium touched $834.45 an ounce on Comex on May 21 , the highest level since March 2011, before closing at $830.45. This marked a $15 gain on last week’s finish at $815 an ounce. The pgm metal recorded an all-time high of $865 an ounce in February 2011.
Gold, meanwhile, fell back below $1,300 an ounce this week. In recent weeks, the precious metal has found some support on escalating tensions over Ukraine. A report from the World Gold Council on May 20 showed physical gold demand from top consumers China and India fell in the first quarter from the same period in 2013.
Gold futures for June delivery on Comex finished at $1,288.10 an ounce on May 21, down $1.2 on last week’s close at $1,293.40 an ounce.
U.S. tops $104, Brent hits $110 a barrel
U.S. crude oil futures topped $104 a barrel at midweek, their highest in a month, after the country’s Energy Information Administration (EIA) confounded market expectations on weekly crude inventories. The EIA reported a 7.2-million barrel decline in U.S. commercial crude stocks to 391.3 million barrels for the week ended May 16, far more than the modest fall the market had been expecting.
