An end to the platinum sector strike firms up the rand

by , 24 June 2014

Yesterday afternoon, news emerged that the five-month long strike in the platinum sector was over. The Association of Mineworkers and Construction Union (AMCU) and the top three platinum producers finally agreed a new three-year deal. The rand strengthened on the news. And this morning the rand continues to hold its gains. Let's take a closer look at what's going on…

The rand rallied 1% on news the strike was over

After the news broke, the rand “gained 1%, breaking through R10.56 to the dollar at one point for the first time in a fortnight,” reports Fin24.

By the AMCU accepting a new wage deal, this brings an end to the strike that started on 23 January at Anglo American Platinum, Impala Platinum and Lonmin. The strike affected 40% of global platinum production.

The platinum producers have lost nearly R24 billion in lost revenue over the length of the five-month strike, adds Fin24.

The strike in the platinum sector led the South African economy into contraction over the first three months of the year, notes MoneyWeb. This led many analysts to predict another recession was afoot for South Africa.

But with all good news comes problems.

The rand remains at risk

Rand Merchant Bank’s Carmen Nel said with platinum production resuming, there will be “existing strain in the power grid,” notes MoneyWeb. This is in light of Eskom’s recent power supply issues.

Barclays Research also warned that despite a brief rally in the rand, it remains vulnerable, says BDLive. This as the US is due to release its inflation data and the situation worsens in Iraq.

And if that wasn’t enough, it looks likely that NUMSA is going “to go on strike next week in the key auto sector,” adds MoneyWeb.

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At time of writing, the rand was trading at 10.56 to the dollar, 14.37 to the euro and

So despite the end of the platinum sector strike being good news for the rand, it looks like the good news may be short lived.

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