Labor strikes in South Africa have entered a 17th week, costing the country 750,000 ounces in lost platinum production and 550,000 ounces of lost palladium output, according to ETF Securities.
The iShares MSCI South Africa ETF (NYSEArca: EZA), which allocates 11% of its weight to the materials sector, has managed a three-month gain of 16% despite the labor violence. [South Africa ETF Impresses]
“We remain positive platinum and palladium price fundamentals in the long run. Although both markets have become a lot tighter over the past months, we believe the catalyst for a sharp rally would be for one of the top 3 producers (Amplats, Implats and Lonmin) to fail to meet all contractual obligations or to announce active metal buying on the open market to supply its contracts,” said Gambarini. “While we acknowledge that PGM prices could be subject to a correction if the heightened risks in the Crimean region and prolonged strikes in South Africa fade or disappear, we believe the downside risk is fairly limited.”
ETFS Physical Palladium Shares
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD and SLV.