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Why a bull market is just getting started for platinum

by , 22 May 2014

Platinum has had a rough year so far. The strike hitting the world's three largest platinum producers is nearly four months old. And through this the supply of platinum continue to be under severe pressure. There's a supply crunch on the horizon. But these aren't the only reasons why platinum is set to take off. Let's take a closer look at two reasons why this is only the beginning of a bull market for platinum…

Reason #1: Production costs are spiralling

As the strike continues, one thing is for sure, when the strike comes to an end, wages will be much higher. And wages are the highest bill platinum producers have to pay, Jeff Clark in The Crux explains.

Platinum production costs are higher than the price of platinum.

Once the strike is over, these costs are going to increase. And with this in mind, the chances of costs falling are practically zero.

So for platinum production to continue at normal levels, the price will have to rise. Morgan Stanley reckons this will take four years to happen.

And if the price doesn’t rise, platinum producers will cut back on production. This will add to the current supply crunch.

Reason #2: Platinum inventories are declining – fast

When the strike first began, there was plenty of platinum stockpiles. But with the strike still going on some four months later, these stockpiles are getting low.

For instance, Impala Platinum is now using its inventories to supply its customers.

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With platinum producers struggling, some of their customers are getting their platinum from elsewhere. But this is adding to pressures on the supply of platinum

So there you have it, why a bull market is just getting started for platinum.

Why a bull market is just getting started for platinum
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