Platinum price back to triple digits

October 23, 2015

New York (Oct 23)  On Friday, platinum futures gave up more ground as investors continue to asses the damage following the emissions scandal at Volkswagen and refocus on fundamental in the industry.

In afternoon trade on the Nymex in New York platinum for delivery in January – the most active contract – lost more than $16 or over 1% to a low of $996.50 an ounce, before recovering to close above $1,000.

Platinum fell to a seven year low of $893  at the end of September shortly after dieselgate first hit the headlines. Platinum's main application is in diesel engine exhaust systems to scrub harmful carbon emissions.

Weakness this week has been blamed on news that Volkswagen, Europe and briefly the world's top automaker, will  stopping selling affected diesel vehicles on the continent while it recalls 11 million vehicles worldwide.

On Thursday the world's number one producer of the metal, Anglo American said its deferring capital investment decisions regarding its South Africa operations for at least a year. This follows the sale of its Rustenburg complex to a Sibanye Gold for $330 million in September.

The diversified miner also said that platinum output climbed 14% to 614,300 ounces in the third quarter as production recovers following a five-month strike at its South African mines in 2014. Anglo said it expects to produce 2.3 million to 2.4 million ounces this year.

The sale turns Sibanye, the world's ninth largest gold miner following a turnaround at South African mines it bought from Gold Fields in 2013, into the number five producer of platinum globally as it attempts to up production at Rustenburg to 500,000 ounces per year.

Nymex contracts for December delivery of sister metal palladium exchanged hands for $694.75, up 1.3% on Friday. Palladium is expected to benefit from a move away from diesel engines because the metal is used in gasoline-powered vehicles. In August the metal plunged to $532 an ounce, but quickly recovered. The price of palladium reached 13-year highs above $900 an ounce in September last year.

Together Russia and South Africa control between 70% and 80% of the world’s supply of PGMs. Russia's state stockpiling organization called Gokhran sits on an disclosed amount of palladium built up during the Soviet era, which it releases onto the market from time to time.

The structure of supply has not altered in any substantial way since the 1970s when platinum and later palladium came to the fore as an important part of the world’s automobile industry.


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