Mining Weekly

JOHANNESBURG (miningweekly.com) – Current negative platinum sentiment is a result of the delivery of an accumulation of mined and recycled metal into a market that does not really need it at the moment, says Impala Platinum marketing executive Derek Engelbrecht.

Engelbrecht was commenting on a contention put forward by Dr Fraser Lee Murrell of Melbourne, Australia, that platinum futures markets are “manipulating prices to transfer commodities from the poor producing countries to the rich consuming countries”.

“Traders are certainly able to manipulate prices both up and down, but I would suggest only on a short-term basis as there is always a trade on the other side of the ‘manipulator’. If the market goes too low, someone will see an opportunity and start to buy, and vice versa. Remember how the traders drove the markets to record highs after the Eskom debacle,” Engelbrecht recalls.

"The only way to remove the negative sentiment is to increase demand or reduce supply. Both are happening as we speak but it will take some time to manifest into stronger markets,” he adds.

Murrell asserts, however, that after setting a meaningless price, physical platinum importers then use that meaningless 'price' to purchase physical metal from South Africa.

A futures market record he sent to Mining Weekly Online points to negligible near-term trading but significant futures trading.

He also exposes the large number of contracts – representing multiples of annual supply and traded backwards and forwards, several months out – that are not accompanied by the delivery of any physical platinum metal and questions whether, in the absence of physical delivery, such trades can really be classified as trades at all.

Engelbrecht concedes that physical delivery is rare, but believes that the futures markets are a hedging tool that allows both buyers and sellers to lock in forward prices and thereby eliminate risk.

“Physical delivery is not necessary to unwind a position – that is the purpose of a futures market,” says Engelbrecht, who adds that most physical contracts are based on London fixes, which occur daily and which reflect the will of buyers and sellers on the days in question.

Murrell contends, however, that current registered, available-for-sale, physical volume of platinum on the Nymex in the US is a miniscule 1/160th of annual demand, and should thus not be dominating physical markets, but Engelbrecht counters that “very little physical business is based on Nymex prices”.

South Africa is, however, seen to be punching below its weight in the global platinum market and it will not be surprising if the way in which the price of platinum is determined, particularly in futures markets, comes under greater scrutiny.