Platinum rises to record on mine disruptions, palladium gains
Platinum surged to a record after blackouts and mine disruptions in South Africa
Platinum surged to a record on February 4 after blackouts and mine disruptions in South Africa, the world`s source of 75% of the metal, fueled concerns that demand for the metal will outpace supplies.
Palladium also gained. Anglo Platinum Ltd and Impala Platinum Holdings Ltd, the world`s largest producers of the precious metal, said their South African mines resumed full operations after power cuts shut them last week.
Most mines in South Africa reduced or suspended production for five days through February 1 after state utility Eskom Holdings Ltd couldn`t meet electricity demand.
"Platinum`s fundamentals look better and better," John Reade, head of metals strategy at UBS Ltd in London, said in a report.
Platinum prices jumped 14% last month, the most since at least 1999. Platinum futures for April delivery gained US$27.40, or 1.5%, to US$1,797.60/oz on the New York Mercantile Exchange. Futures earlier reached US$1,798/oz, a record for a most-active contract.
The metal surged 55% in the past year, including 5.4% last week. "Platinum`s recent spectacular price performance is the result of potential long-term disruptions to supply in a market that is already tight and running at low inventory levels," said Stephen Briggs, London-based metals economist at Societe Generale.
"The development that is generating so much nervousness comes from South Africa."
Palladium futures for March delivery jumped US$13.95, or 3.3%, to US$431/oz. The futures earlier rose to US$432/oz, the highest in more than six years.
The price reached US$1,090/oz, a record for a most-active contract, on January 26, 2001. The metal rose 27% in the past year before today, including 8.2% last week.
The palladium market may go into deficit in 2010 because of growing demand from China, said Stephen Forrest, director and founder of Oxford, UK-based commodities analysts SFA.
"Strong Chinese autocatalyst demand will push this market into a deficit by 2010, assuming there are no more Russian stockpiles," Forrest said February 4 at the Mining Indaba conference in Cape Town, South Africa.
Platinum and palladium are used in jewelry and auto catalysts, which remove noxious gases from car emissions. Some investors buy the precious metals to hedge against inflation.
Markets for the metals soared after Eskom reduced or cut off power to mines in South Africa, citing maintenance needs, rain-soaked coal and a delay in adding capacity.
After restoring supplies, Eskom began cutting power by 1,500MW on February 4, with the possibility that it may have to shed as much as 3,000MW, a spokeswoman for the company said.
"The majors only expect power security until 2010, with most looking at backup options," Forrest said.
Supplies have fallen short of demand in seven of the past eight years, said London-based Johnson Matthey plc, the world`s largest distributor of the metal. Mined production declined last year for the first time since 1999, Johnson Matthey estimated in November.
(Bloomberg, February 4)
