Platinum: Time to shine

The situation worsened on June 3 when an NUM steward was shot dead at a Lonmin mine. Reports abound that workers are arming themselves and bringing weapons into the mines. Union leaders are doing little to douse the flames, with Joseph Mathunjwa, leader of the AMCU saying last week, “Even if you kill me or assassinate me there are those who will follow and take the baton,” following a shooting days earlier that killed another AMCU leader in a tavern. Violence, wildcat strikes, legitimate work stoppages: There is a multitude of risks that could derail South African platinum production. The market returned to deficit in 2012 according to GMFS, a leading precious metals consultancy, and is vulnerable to disruptions in supply (Chart 3).

Investors seem to have taken note, as inflows into physically-backed platinum ETFs have been strong, even while money flows out of the more popular gold- and silver-backed funds (Chart 4). With a growing source of new demand, at-risk supply, and a relatively low price compared with its sister metal palladium, platinum looks set to outperform in the near term, at least through the “strike season.” Protective stops should be placed below the recent low of $1,430.

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