Roman Baudzus writes --
Market observers said that silver´s price decline of more than 20% in only three trading days could lead to more investor attention being focused on the platinum and palladium markets. Though silver has outperformed all other precious metals over the last few months, platinum and palladium are in heavy demand from industrial end users, and appear to have reached the end of their price correction phase.
In the last couple of weeks speculators have tried to send the silver price above its all-time high of $50.35 per ounce that was reached in New York in January 1980. But according to market experts, platinum and palladium have more supportive price conditions than silver. This assumption is based on the fact that approximately 87% of the worldwide palladium supply comes from just two countries: Russia and South Africa. Both countries also account for 90% of the world’s annual platinum supply.
Mining strikes and other production disturbances in these countries can have big effects on the prices of these metals. South Africa’s National Union of Mining Workers (NUM) has recently called on the management of Impala Platinum (Implats) for a pay increase of 14.2%, but according to official statements from South Africa´s Statistics Bureau, the country’s inflation rate was only 4.1% in March. South Africa’s mining companies have for a long time struggled with power blackouts due to ageing energy infrastructure, which has resulted in reduced mining output. Increased wage demands from unions could pile new pressures on many South African mining companies. These businesses claim that excessive wage demands from unions could destroy the competitiveness of the South African mining industry.
These companies are also trying to hedge against political uncertainty in the region, sparked by the Zimbabwean government’s recent decision to expropriate foreign investors’ mining equity. As a means of moving away from Zimbabwean production, South Africa’s Aquarius Platinum has bought the company Afarak and the Booysendal South property from Northam Platinum for US$179 million. Aquarius’s resource base has increased by 50% as a result of these recent purchases. Output at its Zimbabwean mines contributes about 20% to Aquarius’s total output.
In Russia, the mining giant Norilsk Nickel announced last autumn that Russia´s national palladium stocks will be depleted by the end of this year, an announcement that gave an immediate boost to palladium buying. International car manufacturers have also enjoyed the benefits of government programmes aimed at stimulating car sales – many of them hoping to get people to trade in older, less fuel efficient vehicles for newer more “green” models. As both platinum and palladium are crucial elements in the construction of catalytic converters, these stimulus measures by governments around the world have boosted the demand for both metals.
Car sales growth in emerging markets – notably in the so-called BRIC countries – has risen strongly in the last two years, further bolstering the profits of car companies. Increased jewellery buying in many developing nations is also contributing to demand for platinum. At least a third of the world’s annual platinum production is used to make jewellery.
Goldmoney.com
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