Holdings of the world’s largest platinum-backed exchange-traded fund (ETF), Absa’s NewPlat, breached 1 million ounces for the first time last week, data from the fund showed, as a strike in South Africa’s platinum sector prompted new buying.
NewPlat, launched on the JSE less than a year ago by Absa Capital, grew within four months into the largest ETF of its kind as concerns over labour issues in the country and the appeal of a rand-denominated fund fuelled buying from local investors.
It holds almost twice as much platinum as the second-largest fund, New York-listed ETFS Physical Platinum.
The ETF saw its first monthly outflows in January and February after averaging inflows of 80 000 ounces a month in the second half of last year, worth some R1.2 billion a month at yesterday’s prices.
Inflows have since resumed, with the fund seeing additions of almost 63 500 last month and almost 56 000 ounces in the first days of this month. Last week, the fund recorded its biggest weekly inflow this year.
Platinum prices outperformed bellwether precious metal gold at that time, extending its premium over the yellow metal to its highest in more than two months at almost $150 (R1 582) an ounce as a strike across the platinum belt ground on.
The action among miners at Anglo American Platinum, Impala Platinum and Lonmin, which began on January 23, is estimated to be costing 10 000 ounces a day in lost platinum output.
While consumers have been cushioned from immediate production losses by the availability of above-ground stocks of the metal, analysts say in the longer term the strike will tighten the market, potentially leading to price gains.
“For platinum, it’s a positive from a price perspective that you have over half the South African platinum industry not producing, at a time when industrial demand is looking pretty good this year,” Jonathan Butler at Mitsubishi said. “Also, because the Absa fund is rand-denominated, it gives some currency exposure at a time when in general the currency has been weakening. Those two things together explain the investor interest.”
ETFs, which issue securities backed by physical stocks of a commodity, have proved a popular way to invest in metals in recent years.