Palladium Rises to 34-Month High on South Africa Impasse
New York (June 6) Palladium futures rose to a 34-month high and platinum posted the longest rally in three weeks after mining companies and striking workers failed to reach a pay accord in South Africa, a top producer of the metals.
Prospects for a labor agreement weakened after the union sought changes to the latest proposal brokered by the government, a person familiar with the talks said yesterday. Palladium has climbed 13 percent since the start of the strike on Jan. 23, and the ratio to gold has dropped to a 10-year low.
Demands for higher wages are “unsustainable” because of low productivity, said Mark Cutifani, the chief executive officer of Anglo American Plc, which controls the top platinum producer. The metals are used in jewelry and pollution-control devices in cars. Supply deficits will increase to the highest in at least 30 years, according to Johnson Matthey Plc, which makes a third of the world’s catalytic converters.
“The South Africa situation continues to dominate the supply story,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “The fundamentals are very supportive, and we expect prices to remain strong.”
Palladium futures for September delivery gained 0.5 percent to settle at $844.25 an ounce at 1:12 p.m. on the New York Mercantile Exchange. Earlier, the price reached $845.90, the highest for a most-active contract since Aug. 1, 2011.
Platinum futures for July delivery rose 0.6 percent to $1,453 an ounce. The price climbed for the third straight day, the longest rally since May 14. Trading was 90 percent more than the average in the past 100 days, data compiled by Bloomberg showed. On May 22, the metal reached $1,497.80, the highest since Sept. 9.
South Africa is the second-biggest palladium producer and the largest for platinum. A strike by 70,000 members of the Association of Mineworkers and Construction Union crippled metal output and caused the economy to contract in the first quarter.
Anglo American Platinum, Lonmin Plc and Impala Platinum Holdings Ltd. say the strike has cost 21 billion rand ($1.98 billion) in lost revenue, while workers have forgone more than 9.5 billion rand in wages.
Ngoako Ramatlhodi, the minister of mineral resources, said today labor talks “are at a sensitive stage and we all remain committed to the process.” Negotiations resume on June 9.
Palladium is used in catalytic converters in the U.S. and China. Industrial applications account for 94 percent of the metal’s use, according to London-based Johnson Matthey.
Yesterday, investors boosted holdings of exchange-traded products backed by palladium to a record 90.7 metric tons, according to Bloomberg data. Platinum assets in ETPs climbed to an all-time high of 86.5 tons on May 28.
Today, the spot gold-palladium ratio fell as much as 1.1 percent to 1.4762, the lowest since May 3, 2004, according to Bloomberg generic prices. On May 22, holdings in gold ETPs were the smallest since October 2009.
Gold futures on the Comex in New York have dropped 12 percent in the past 12 months, while palladium has gained 11 percent.