Despite the major undersupply of platinum and strong upcoming demand, platinum prices remain at levels that leave many South African mines under water.
Exactly how the price of platinum is determined – particularly in futures markets – needs to come under scrutiny.
A futures market record sent to Mining Weekly points to negligible near-term trading but hectic futures trading.
Thousands of contracts – representing multiples of annual supply – are being traded backwards and forwards, several months out from now.
Will these trades be accompanied by the delivery of physical platinum metal?
One observer questions whether, in the absence of physical delivery, these trades can really be classified as trades at all.
It is alleged that the current registered, available-for-sale, physical volume of platinum on the Nymex is miniscule – something like 1/160th of annual demand.
If so, is a tiny volume of physical metal supporting the global platinum price – at virtually no cost to the controlling bankers?
Are the futures markets dominating the physical markets, rather than the other way round?
Does this mean that futures markets can basically set the price at any level?
Is the traditional function of the market not being turned on its head?
Are the people running this “market” so far removed from the rock face that they do not know that 26 people benefit from every one person who works on a platinum mine in South Africa, as last year’s 370-page study – funded by the platinum-dependent Bafokeng community – found.
As a direct employer of 500 000 people, it can thus be said that the South African mining industry supports the livelihoods of 13-million people.
A Mining Weekly source writes that paper futures are only creating the appearance of a fair and active market in the absence of physical delivery.
It behoves every South African in the know to give a yea or nay to the way in which the price of this national patrimony is determined.
Price determination, like justice, needs to be seen to be done.
The sweat and tears that go into platinum production and the large numbers of South African men, women and children who are directly and indirectly dependent on it demand full transparency.