gestate fischer: Market Extra: Platinum slated to gain more on S. Africa unrest

Saturday, September 15, 2012

Market Extra: Platinum slated to gain more on S. Africa unrest

By Claudia Assis, MarketWatch

Mineworkers take part in a march outside the Anglo American mine in South Africa's North West Province, September 12, 2012.

SAN FRANCISCO (MarketWatch) ? Labor strife in South Africa is set to boost platinum prices for months to come, with a once oversupplied market likely becoming tighter by year end.

Industrial demand for platinum is still seen as weak, and investors seem ready to make up for that lack of appetite. Platinum is a cheaper alternative to gold, and the concerns about South Africa, which mines 80% of the metal, are unlikely to abate. That outlook has enticed financial buyers.

/quotes/zigman/8702785 PLV2 1,709.10, +29.60, +1.76%

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Some analysts are calling for platinum futures prices beyond $1,750 an ounce by the end of the year, which would be a 2% increase over Friday?s settlement price.

Platinum for October delivery /quotes/zigman/8702785 PLV2 +1.76% , the front-month and most-active contract, was up $34.20, or 2%, to settle at $1,713.70 an ounce on the Comex division of the New York Mercantile Exchange on Friday. It gained 7.4% just this week.

That climb has come on the back of weeks of South African strikes and production cutbacks.

Heightening supply fears, the prospects for output coming back on line quickly are not good.

South Africa?s latest labor unrest started with protests and violent clashes at Lonmin Plc?s /quotes/zigman/296591 UK:LMI +4.95% ?Marikana mine last month, including a police shooting that left 34 dead in late August.

Production losses in South Africa are running around 4,000 ounces of platinum per day, or almost a third of total South African production, estimated chemical and precious metals company Johnson Matthey.

The political and labor issues won?t ?get resolved quickly or easily,? said Jeffrey Christian, managing partner at CPM Group, which estimates platinum markets are not oversupplied at the moment.

?It is a lot tighter than people think,? Christian said. ?You could see prices north of $1,750 by the end of the year.?

Platinum has gained more than 21% this year, second only to silver gains among the most liquid metals futures. Platinum, mostly used as a key component in catalytic converters in diesel engines, has gained around 11% in September.

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Some of that rise has likely come from investors that have opted to buy stock-exchange-traded vehicles rather than go the traditional futures route.

Exchange-traded funds and notes backed by platinum are hovering close to a September 2011 record, said Carsten Fritsch, an analyst with Commerzbank.

Holdings in platinum-backed exchange-traded products totalled 1.471 million ounces as of Thursday, compared to 1.489 million ounces in the September high-water mark. That?s up from about 1.35 million ounces until mid-August.

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