TORONTO (miningweekly.com) – Platinum prices should start to show weakness in the second half of the year as labour and electricity issues in South Africa, which produces over 70% of global supplies, ease, Thompson Reuters GFMS senior mining analyst William Tankard said on Sunday.
A strike at the world’s biggest platinum mine, Impala Platinum’s Rustenburg operation, could remove at least 125 00 oz to 130 000 oz of supply this year, he said.
Around 5 000 rock drill operators downed tools at the company’s Rustenburg mine in January, in a dispute over pay levels.
The situation degenerated, and all 17 000 workers at the operation embarked on an illegal work stoppage that lasted up until early March, and saw three workers killed in related violence.
Prices for platinum rose from around $1 550/oz on January 23 to $1 729/oz a month later, as the strike caused fears over supply of the metal, used to cut vehicle exhaust emissions, and to make jewellery.
Car makers have been substituting platinum for its cheaper sister metal, palladium, as a result of high prices, leading to shrinking difference in how much an ounce of each costs.
Palladium was trading at $709/oz on Friday, and Tankard told Mining Weekly Online the metal may reach $1 000/oz “over the next couple of years”.
The price will likely continue to converge on platinum’s, he said.
“We think it’s set up where the gap closes significantly probably in the latter half of this decade,” Tankard commented on the sidelines of the Prospectors and Developers Associatuion of Canada conference in Toronto.
While a number of factors were providing short-term support to the platinum price, including electricity supply problems, strikes, and safety shutdowns in South Africa, “it doesn’t fundamentally change the long-term picture” for the metal, he said.
Platinum is mainly used as an auto-catalyst in diesel engines, which are popular in European cars, while palladium mostly goes into petroleum-powered vehicles.
Increasingly, palladium has gone into diesel auto-catalysts as a substitute for platinum, as a result of the price difference between the two precious metals, Tankard said in an earlier presentation.