The five-month miner strike in South Africa has ended, but platinum exchange traded fund investors may still see low supply and elevated prices over the short-term as normal mining operations slowly get back online.
The ETFS Physical Platinum Shares (NYSEArca: PPLT) was up 0.9% Tuesday. PPLT has gained 5.9% year-to-date. [ETF Chart of the Day: Platinum Power]
Platinum spot price was hovering around $1,470 per ounce Tuesday.
South Africa, which accounts for over two-thirds of the world’s platinum supply, has ended a strike with the main platinum mining union, with workers going back to work on Wednesday, the Wall Street Journal reports.
Analysts calculate that the strike caused 1 million ounces of lost mined platinum production this year, or about a fifth of global output in 2013, Financial Times reports. Consequently, the market deficit is expected to increase to 1.2 million ounces this year, the highest in four decades.
While the strikers will return to jobs this week, the prolonged inactivity will “cast along shadow over output,” Jonathan Butler, precious metal strategist at Mitsubishi, said in the FT article.
Specifically, some miners moved back to distant families and won’t resume work right away, and many will require retraining and health checks.
“Some of the miners may not come back at all, so crews will be a bit smaller,” Butler added. “At a minimum it will be two to three months before we get near pre-strike levels of output.”
The South African economy may begin to pick up after the end to the strikes. Platinum producers stated that they lost over $2 billion in revenue since the strikes started while workers lost about $1 billion in wages. The economy contracted 0.6% over the first quarter year-over-over year, the first decline since 2009. [Macro Woes Could Hamper South Africa ETF]
“It’s going to take the economy quite a few months to recover. There will probably be parts of the platinum belt that never recover,” independent economist Mike Schussler said in the WSJ article.
The iShares MSCI South Africa ETF (NYSEArca: EZA) is up 8.3% year-to-date. EZA has a 9.7% weight toward basic materials. The ETF’s largest sector weights include telecom services 28.7%, financial services 24.2% and consumer cyclical 12.6%.
ETFS Physical Platinum Shares
For more information on the platinum market, visit our platinum category.
Max Chen contributed to this article.