Platinum price back in triple digits

Platinum futures trading on the Nymex market in New York declined for a fourth day in a row on Tuesday to $996.80 an ounce, dragged down by a stronger dollar, weakness across the precious metals complex, and the signing of a wage deal in key producer South Africa.

Year to date the platinum price is still up more than 14%  thanks to predictions of another annual market deficit and the threat of labour action in South Africa which is responsible for 73% of global annual supply, but those fears have been mostly allayed.

On Tuesday South Africa's National Union of Mineworkers entered into a two-year wage deal with Impala Platinum following last week’s strike involving 500 workers at the company's refinery. The agreed pay hike for workers are in line with inflation in the African nation and nowhere near demands previously made in the sector.

In its latest quarterly report the World Platinum Investment Council adjusted the supply deficit forecast for 2016 upwards by 16% or 65,000 ounces to 520,000 ounces, from 455,000 ounces previously, mostly on the back of lower than expected recycling growth. 2016 is set to the fifth annual year of market shortages for platinum, used mainly in jewellery and autocatalysts.

Annual supply from South Africa has fallen from a peak of nearly 6 million ounces a decade ago to an expected 4.2 million ounces this year

Total mining supply was forecast to fall 3% to just under 6m ounces. Annual supply from South Africa has fallen from a peak of nearly 6 million ounces a decade ago to an expected 4.2 million ounces this year.

A significant factor that has been putting a lid on price rises is the amount of above ground stocks of platinum (usually vaulted investor holdings), but the WPIC says these have more than halved over the five years of supply deficits and is expected to have dwindled to 1.87 million ounces this year. The authors of the report note that "positive sentiment has reduced the propensity of holders to sell platinum to meet deficits."

South African mine production figures for July released today showed PGM output fell by 10.8% compared to June and 8.2% year on year as miners close down unprofitable mines and safety stoppages halt operations.