June 2014 Price Report

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June 2014 Price Report

Platinum

The platinum market was dominated in June by developments in the South African mining sector, with the on-going strike taking a number of twists and turns that subsequently influenced price, before a settlement was finally agreed towards the end of the month. Initially, encouraging signs that the new Minister of Mineral Resources Ngoako Ramatlhodi might be able to bring the long running strike to an end provided an early indication of the so-called ‘strike premium’, as platinum tumbled 2.9% to $1422 between 30th May and 4th June on news that AMCU would consider new government proposals following the latest round of tri-lateral talks. Optimism was short-lived however, as talks collapsed early the following week with AMCU reiterating its objective of a 12,500 ZAR basic wage in 4 years, sending platinum price up by 2% to $1478 on the 10th, the largest single-day price rise since January.


Later the same week a surprising breakthrough saw AMCU accept an improved offer “in principle”, sending the strongest signal so far that an end to the longest running strike in the history of South African platinum mining was in sight. Platinum price retreated 3% on this occasion, from a June-high of $1483, the largest single day decline in 2014, at the same time providing further confirmation that any ‘strike premium’ would be limited in depth.

Platinum 0900 London Base Prices - June 2014
  High Low Average
$ per oz 1,490.00 1,436.00 1,461.25
£ per oz 881.34 849.40 864.34
€ per oz 1,096.07 1,056.35 1,074.92


In a last-ditch attempt at brinksmanship on the part of theUnion, additional considerations (regarding allowances, a one-off ‘return towork’ payment and the timescale of the potential agreement) were tabled a few days later. The miners were quick to refuse these demands as unaffordable,claiming they would add 1 billion ZAR to the cost of the agreement; the platinum price was subsequently bolstered, rising 2.2% over two days, before a compromise agreement was finally agreed upon on the 24th. Perhaps surprisingly given the hitherto relative importance of supply-side fundamentals in June, news of the final agreement failed to dampen the market, with platinum instead finishing the month strongly to reach $1480 on the 30th,just 0.3% shy of the 2014 high achieved in March. Though the platinum price hadbenefitted little from the strike itself, the post-strike picture started tolook more appealing; a significant reduction in excess stocks, allied with theinevitable continuation in sub-optimal production as miners ramped-up productionslowly, attracted bullish investors to re-enter the market now that a majoruncertainty in the form of the ‘strike premium’ had been removed. Net long speculative positions on NYMEX rose by 6% in the final week of June, off setting the sell-off seen earlier in the month.

A preoccupation with the fundamentals ensured that platinum’s relationship with gold weakened significantly in June, with the two metals moving in tandem on only twelve of twenty-one trading days. While platinum managed to extend its premium over gold to a 2014-high of $221 in the wake of a breakdown in talks on the 11th, gold subsequently outperformed platinum for much of the remainder of June, reducing the premium enjoyed by platinum to below $140 on the 23rd.

Palladium

The palladium price continued to broadly track that of platinum, with both metals moving in tandem on seventeen out of twenty-one trading days, though palladium was marginally outperformed by its sister metal, perhaps reflecting platinum’s greater exposure to South African mining.

Palladium price dropped 2.9% on the 12th, the largest single-day fall in 2014, on news of an agreement “in principle” between the miners and AMCU, indicating that the ‘strike premium’ in palladium was just as limited as in platinum, despite palladium’s stronger advance year-to-date. In the end, as with platinum, any ‘strike premium’ proved to be short-lived as the price ended the month strongly in the wake of a final agreement, reaching $844 on the 30th.

Palladium 0900 London Base Prices - June 2014
  High Low Average
$ per oz 869.00 818.00 842.35
£ per oz 514.02 483.85 498.26
€ per oz 639.25 601.74 619.65


Rhodium

A reduction in the physical buying interest from Asia that had contributed to a recovery in the rhodium price towards the end of May resulted in a limited correction in early June, with the price meandering steadily down to a June-low of $1100 on the 11th.

A subsequent mini-recovery saw rhodium end the month at $1115, seemingly unaffected by supply-related events in South Africa.

Rhodium 0900 London Base Prices - June 2014
  High Low Average
$ per oz 1,140.00 1,100.00 1,117.75
£ per oz 674.32 650.66 661.16
€ per oz 838.61 809.18 822.24