Extended Miner’s Strikes Threaten To Send Platinum Prices Up

The prolonged miner’s strike in South Africa’s platinum sector has pushed up the price of the precious metal and is threatening to ruin the economy of the country. South Africa accounts for around 40 per cent of the global platinum output but with workers demanding higher pay production has stalled.

The dispute over wages began 18 weeks ago when miners demanded an increase in wages to 12 500 rands a month. Anglo American Platinum, Impala Platinum and Lonmin who own the mines, have offered to phase the increase in stages up to 2017, but their proposal has been dismissed by the Association of Mineworkers and Construction Union.

The strike is South Africa’s longest and costliest mining strike in history, costing the economy an estimated US$1.9bn in lost revenue. Mayor of Moses Kotane, Fetsang Mokati-Thebe told reporters the economy is deteriorating and a new budget has had to be revised to make sure basic services of water and street lighting are maintained.

With talks still to find a reasonable resolution, Nhlanhla Nene, South Africa’s finance minister raised concerns that the strike is threatening to push the continent’s most advanced economy into recession. The situation was described as “critical.”

Volatile platinum market

The platinum market has been particularly volatile since the strike broke out in January. Earlier this month prices were almost touching the US$1500 price point, but have since fallen to US$1450 an ounce, the same price they were before mineworkers downed tools.

Analysts say the market only kept an even keel because of the reserve stock which has been drip-fed through to dealers and cushioned prices. However, it is estimated the stockpile is running low and prices could rebound back to the US$1500 mark they were at last September.

Platinum recorded its all-time high in 2008 when the precious metal tipped US$2,290 an ounce, and with prices expected to rise, market watchers say this is a good time to buy platinum. Once prices reach US$1500 an ounce the metal looks a less attractive investment.

The main consumers of platinum are car manufacturers in Europe and China which use the metal as a component in catalytic converters. Jewellers are another large buyer of platinum as an alternative to gold and silver, but neither industry is likely to drive prices higher.

However, analysts report the precious metal is becoming price sensitive given the drop in imports. Even if the strike ends this week, producers will need to ramp up output levels to satisfy demand. An estimated million ounces of the precious metal have been lost in production.

Given platinum prices are likely to rise sharply in the coming weeks, analysts say the time to invest in the precious metal now. To make sure you take advantage of the market head to coininvest.com today and cash in on low platinum prices and make a quick profit.