Platinum buying expands as mining strikes escalate

Investors are buying platinum at the fastest pace since 2010 after disruptions at South African mines caused the biggest loss of supply in at least seven years.

Strikes and pit closures meant mining companies extracted 380,000 ounces less than they could have this year, equal to about 6 percent of global output, Deutsche Bank AG estimates. Metal purchases through exchange-traded products were the most in 20 months in August, data compiled by Bloomberg show. Prices will average $1,625 an ounce in the fourth quarter, the highest in more than a year, according to the median of 12 analyst estimates compiled by Bloomberg.

The lost production is diminishing a glut that drove prices to within 0.4 percentage point of a bear market in July and below the cost of extracting the metal. The rebound accelerated after police killed 34 strikers at Lonmin Plc’s Marikana complex last month. It was the worst mine violence since the end of apartheid in 1994 in South Africa, which accounts for about 75 percent of global output. Hedge funds are now their most bullish since March, U.S. government data show.

“Supplies are going to be challenged,” said Nic Johnson, who helps manage $30 billion of commodity assets at Pacific Investment Management Co. in Newport Beach, California. Platinum “moved very close to the marginal cost of production which should put an upward pressure on prices. Any type of outages in South Africa will make it more attractive.”

Global Production

Platinum is now 13 percent higher this year at $1,579.75, having dropped to an almost seven-month low of $1,379.25 on July 24. Only silver has gained more this year among precious metals. The Standard & Poor’s GSCI gauge of 24 commodities advanced 4.3 percent and the MSCI All-Country World Index of equities climbed 7.3 percent. Treasuries returned 2.5 percent, a Bank of America Corp. index shows.

Global production will exceed demand by 99,000 ounces this year, 77 percent less than in 2011, as South African output retreats almost 10 percent to a decade-low of 4.38 million ounces, Barclays Plc estimates. Supply will contract 6 percent, outpacing a 2.2 percent decline in demand, Barclays forecasts.

Lonmin, the third-biggest platinum producer, says it has been losing 2,500 ounces of daily production since Marikana was shut by a strike Aug. 10. Impala Platinum Holdings Ltd. shut its Rustenburg mine, the world’s biggest, for six weeks in January after employees went on strike over pay.

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