Palladium futures reached the highest since 2001 on concern that supply will be restricted by a four-month mine strike in South Africa. Gold capped the longest rally since April.
Palladium has climbed 15 percent since Jan. 23, when mineworkers walked out in South Africa, the biggest producer of platinum and second-largest for palladium. Talks ended without a resolution two days ago. Holdings in exchange-traded products backed by the two metals are at records, data compiled by Bloomberg show.
Producers have lost about 22 billion rand ($2 billion) in revenue, making it South Africa’s longest and costliest mining strike. Demand for platinum and palladium, used mainly in pollution-control devices in vehicles, will exceed supply for a third straight year, Johnson Matthey Plc data show.
The strike “is threatening to cause long-lasting damage to the industry,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. “The crisis is starting to look desperate as more players wake up to the fact that existing stockpiles could be depleted very quickly should no agreement be reached going into” the third quarter, he said.
Palladium futures for September delivery gained 0.7 percent to settle at $860.15 an ounce at 12:57 p.m. on the New York Mercantile Exchange. The price touched $864.60, the highest for a most-active contract since February 2001. Trading was 25 percent below the average for the past 100 days for this time, data compiled by Bloomberg showed.
“The strike has made palladium very precious,” Adam Klopfenstein, a senior market strategist at Archer Financial Services in Chicago, said in a telephone interview. “The extended period of shutdown will lower output further.”
The possibility of power disruptions in South Africa may further cloud the supply outlook. State-owned power utility Eskom Holdings SOC Ltd. said it started rolling blackouts for a second time this year as some of its generating plants failed during the peak demand period.
The company is asking more industrial customers to cut use to prevent managed blackouts, it said on June 5.
Investors hold a record 86.5 metric tons of platinum and an all-time high 91.8 tons of palladium in ETPs backed by the metals, data compiled by Bloomberg show.
Platinum futures for July delivery fell 0.1 percent to $1,481.10 an ounce in New York. Earlier, the price touched $1,488.40, the highest since May 23.
The labor action has halted most local operations owned by Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc. The worsening labor environment has contributed to “enormous headwinds” facing the country’s economy, said South African Reserve Bank Governor Gill Marcus. A recession, while unlikely, would be “a very grim outcome.”
On the Comex, gold futures for August delivery rose 0.1 percent to $1,261.20 an ounce in New York, a third straight gain and the longest rally since April 25.
Silver futures for July delivery climbed less than 0.1 percent to $19.172 an ounce on the Comex.