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Mine Strikes vs. Platinum Stockpiles
By Joseph Cafariello | Monday, February 3rd, 2014
Strikes in the mining industry can spread like a wildfire across parched timberland, as strikers march from mine to mine, company to company, inciting more workers to join their cause.
This time, it's the platinum industry in South Africa that's ablaze. No sooner had one lengthy walkout at Northam Platinum Ltd. ended on January 21st than another strike quickly flared up two days later. And this one is huge.
The latest strike began January 23rd, and it has engulfed none other than the world's top three platinum producers — Anglo American Platinum, Impala Platinum Holdings Ltd., and Lonmin Plc. The Association of Mineworkers and Construction Union (AMCU) has mobilized some 70,000 of its members to walk off the job, demanding basic wages be more than doubled to 12,500 rand.
The conflagration grew as a second labor union — the National Union of Metalworkers of South Africa (NUMSA) — pulled some 1,800 workers out of platinum refineries and smelters.
This means platinum production in South Africa is taking hits all along the production line — from the mines to the furnaces and everywhere in between. And since these three producers account for some 60% of global platinum production, you might expect platinum prices to soar through the roof. Right?
Well, you'd be wrong. Dead wrong. Not only have platinum prices not risen, they have fallen — dropping some 5.5% from $1,460 to $1,380 per ounce since the latest strikes began on the 23rd.
If that makes you scratch your head, it shouldn't. This is precisely what happened when Northam Platinum miners went on strike back onNovember 4th. It wasn't until six weeks into that strike that platinum prices started climbing.
Why the delayed reaction? Let's find out...
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Buyers Not Desperate Yet
Commodity markets are a lot like college students; they don't start to panic until the fridge is completely empty. Buyers of platinum from consumer electronics manufacturers to auto makers have access to a decent supply of aboveground stocks for the time being. Although labor strikes had plagued platinum producers throughout 2012 and 2013, quite a lot of fresh supply made it into warehouse stockpiles.
According to estimates calculated by Barclays Bank, platinum stockpiles reserved at the NYMEX warehouses for futures contract delivery grew by 20% in 2013, adding some 40,000 ounces to reach more than 250,000 ounces currently.
The bank further estimates that the world's top platinum producers grew their own inventories last year by some 200,000 ounces.
This means that in 2013, a surplus of some 240,000 ounces of platinum was added to stockpiles. We can understand now why prices didn't react right away to the strike of last November.
When Stockpiles Fall
They did react eventually, as the graph below shows.
Click here to enlargeSource: TradingCharts.com
From the start of the Northam Platinum strike on November 4th (first blue lines), platinum prices had fallen more than 10% until December 19th — some 45 days or six weeks into the strike.
Once a fair bit of inventory had been drawn down, buyers began increasing their orders quickly, as they don't want to be buying when stockpiles are slim amid rising prices.
As a result of that rush to buy, platinum prices rose 10% until the Northam strike was finally settled January 21st.
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Joseph Cafariello for Wealth Daily
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Tuesday, February 4, 2014
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We are currently closed, we re-open on Friday 21st March
the reservations office is still open Monday to Friday 9am to 4pm
Since 1958 the Glengarry Castle Hotel has been a most comfortable country house hotel with a jewel of a setting...on the shores of Loch Oich which lies between Loch Ness and Loch Lochy in the heart of the Scottish Highlands. Small wonder then that guests return time after time to be welcomed by proprietor Janetta MacCallum and her sons Donald and Robert.
 Library |  Library view |  Hall |
The Glengarry Castle Hotel opens in mid March and closes in mid November each year.
 Dining Room |
There is central heating throughout the hotel, this is now powered by ground source heat pumps which run all the time, also heating our hot water.
Good old-fashioned Scottish afternoon teas are a daily highlight.
 Sketch map of hotel |  Sketch map of Invergarry |
 View to Loch Oich |
 Rowing boats on Loch Oich |
 Glengarry Castle Hotel and car park |
please look at the Glengarry Heritage Centre information for more details.
The hotel is completely non-smoking.
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