A source of possible upward pressure on the platinum price has been lifted with the two-year wage agreement reached between Impala Platinum Holdings Ltd. (IMP), often called Implats, and the National Union of Mineworkers (NUM) in South Africa.
According to Bloomberg, a spokesman for the union told reporters that all of its members are back to work at the Implats platinum refinery. The strike began on September 27, making it relatively short-lived. However, the NUM had failed to secure a new agreement after five separate rounds of negotiations. The strike seems to have been the tipping point.
The wage agreement not only raises allowances for medicine and other accommodations but provides workers with annual wage hikes between 7.5% and 10%, which is in line with inflation of the South African rand.
The 500 members represented by the union make up more than half of the Implats workforce. Headquartered in resource-rich South Africa, Implats is the second-largest platinum producer in the world. These two factors make the news especially important to the global platinum trade.
The move may also spur the world's top platinum producer, Anglo American Platinum Ltd. (AMS), or Amplats, to settle a similar wage dispute with its employees. A previous offer of a 6.75% wage hike was rejected by the labor union. In this case, the workers are represented by the Association of Mineworkers and Construction Union (AMCU), the world's largest such union. In 2014, the AMCU staged South Africa's longest-ever labor dispute by striking for five months.
Impacting Platinum Market
The potential of work stoppages and production freezes had been helping support higher platinum prices. With the situation resolved for Implats and a similar remedy expected for Amplats, some downward pressure is to be expected as platinum refining returns to its normal pace. South Africa alone accounts for 73% of the world's annual platinum supply.
Platinum prices have fallen for five consecutive trading days, slipping to about $985 per ounce on Wednesday. The recent losses have dropped spot prices below $1,000/oz for the first time since late June. At its high point in 2016 of $1,180/oz, platinum was up over 30% year-to-date.
The quarterly research done by the World Platinum Investment Council (WPIC) provides forecasts for supply and demand of platinum looking ahead to the end of the year. The WPIC revised its projection of the global supply deficit for the precious metal to 520,000 ounces, the fifth consecutive year of deficits.
On the demand side, the WPIC sees continued growth. Not only has industry leader Valcambi SA partnered with the council to raise awareness for platinum's investment benefits, but several major governments have introduced (or, in the case of the U.S. Mint, re-introduced) platinum bullion coins for investors. The production of the American Platinum Eagle coins and the Austrian Mint's Platinum Philharmonic coins are a sign of rising market demand for platinum. State treasuries wouldn't be issuing these bullion coins if that wasn't the case! Elsewhere in the international markets, a strong Japanese yen has increased purchases of platinum bars in the country, but the WPIC expects a softer yen going forward to curb the pace of these investments.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.