Last Updated : 16 October 2012 at 14:15 IST
Platinum stocks not replenished on mine strikes: Barclays
Source :Barclays Research
Given the soft demand picture, end demand has yet to feel the strain, instead stocks have not been replenished or had a chance to balloon.
By Col. Ajay
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Platinum has been the strongest performing precious metal over the past month as unrest and uncertainty continues to grow in South Africa, disrupting an increasing amount of production and spreading across the wider mining sector and other industries.
While two smaller unions have reached an agreement the major transport union remains on strike threatening to disrupt not only the platinum supply chain but also supply of fuel and food.
On one hand, two of the top three producers have reached an agreement with striking workers. Lonmin has added 14% to its wage bill after the industrial action lasted almost six weeks and, Barclays estimates, caused losses of 125koz.
Implats reported its agreement resulted in an increase of almost 5% to its labour costs. However, the largest platinum producer, Anglo American Platinum, has not commenced negotiations and dismissed 12,000 striking workers. The company has said it has lost 39koz.
However, given the soft demand picture, end demand has yet to feel the strain, instead stocks have not been replenished or had a chance to balloon.
Platinum has narrowed its discount to gold to less than $100 but prices remain driven by headlines from South Africa, and an improvement in the challenges encountered could result in a drop in prices given speculative positioning.
Net fund length and gross long positions have hit fresh record highs, while gross short positions have been scaled back to April lows.