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Platinum and palladium are about to experience a supply squeeze never seen before

by , 22 May 2014

Tomorrow marks four months since the start of the platinum sector strike. The world's three largest platinum producers have had their production crippled. Even though new talks are underway, there's no certainty when full production will resume. And this is having other knock-on effects that are sure to affect platinum, not to mention other linked metals like palladium. Palladium is under severe strain from the issues in SA and issues in Russia, the world's largest palladium producer. Let's take a closer look…

The strike is putting severe strain on platinum producers

The strike affecting Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin kicked off on 23 January. This is the worst strike seen since apartheid ended in 1994, Jeff Clark in The Crux explains.

The affected companies are already trying to work out how to deal with the effect on their production:
  • Amplats is contemplating selling its operations in Rustenburg. A new owner would have to find ways to resolve labour issues.
  • Impala says its operations will remain closed until the second half of the year at the earliest.
  • Some platinum producers may shut down individual shafts to cut costs. To reopen shafts in the future will be a very costly task.
  • Job losses are probably inevitable as the platinum producers affected will have to restructure to cut costs. This alone could trigger more strikes.

The world’s largest producer of palladium is already struggling

Russia provides 42% of the world’s palladium supply. It’s crucial in providing this platinum group metal.

Palladium demand is set to soar as demand increases for catalytic converters, particularly in Asia with the introduction of new regulations.

But Russia has its own problems…
  • Experts believe ore grades are in decline.
  • New mines take up to a decade to come online. Demand dictates that users need these supplies before these mines are operational.
  • Experts put Russia’s stockpile of palladium in the region of 100,000 ounces after having 27 to 30 million in 1990.
These two factors are very bullish indicators for platinum and palladium.

So there you have it, why platinum and palladium are about to experience a supply squeeze never seen before.

Platinum and palladium are about to experience a supply squeeze never seen before
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