Palladium at three-year high as Amcu talks fail

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Nicholas Larkin and Glenys Sim London

Palladium futures reached the highest price in almost three years yesterday after government-led talks with the union leading a pay strike at local producers failed. Platinum climbed to a two-week high and gold was little changed.

More than 70 000 mineworkers have been on strike since January 23. Negotiations overseen by Mineral Resources Minister Ngoako Ramatlhodi with the Association of Mineworkers and Construction Union (Amcu) ended without a resolution. Producers will consider steps to end the strike.

Palladium has gained 18 percent this year and platinum has risen 7.2 percent as the strike has cost companies about R22 billion in lost revenue.

Demand for the metals, which are mainly used in pollution-control devices in vehicles, will exceed supply for a third successive year, Johnson Matthey data show.

Holdings in platinum- and palladium-backed exchange-traded products are at record highs, Bloomberg data show.

“The strike still remains unresolved and this could rumble on for some time,” Robin Bhar, an analyst at Société Générale in London, said yesterday.

“That will gradually tighten up supply. There’s quite a bullish outlook from the demand side” as consumption by car companies increased, he said.

Palladium for September delivery rose 0.8 percent to $847.95 (R8 982) an ounce by 7.31am on the New York Mercantile Exchange yesterday. It touched $849.40, the highest since August 1, 2011. Futures trading volume was 16 percent above the average for the past 100 days for this time of day.

The metal for immediate delivery gained 0.5 percent to $847.78 in London. It reached the highest since February 2011 earlier in the day.

Platinum for July delivery was 1.2 percent higher at $1 472.30 an ounce in New York. It reached $1 473.80, the highest since May 27.

Repeated attempts have failed to engineer a breakthrough in the disput.

The talks that ended on Monday were to be the last led by the government, Ramatlhodi said. The chances of job cuts at mines were rising, he said.

Amcu would meet with members starting yesterday to get views on how to respond to the outcome of talks, union president Joseph Mathunjwa said.

Firing workers

Meanwhile, platinum producers could fire workers on a protected strike if their actions start destroying the business, labour analysts said yesterday.

“The Labour Relations Act does allow for this if the effect of the strike threatens the very enterprise,” Andrew Levy said. “The employer can call them [workers] and say 'I'm going to have to close things down'.”

Another analyst, Tony Healy, said it was unprecedented and unlikely to happen during the current strike in the platinum sector. “This is a little more tricky and unprecedented,” he said. “It is possible… that the employer will say it’s protected, but because of the mayhem it is causing… the protection you are afforded should be removed.”

Both Levy and Healy agreed that retrenchments would more likely be the outcome. Levy said he did not see a solution to the strike anytime soon, and no matter what happened mineworkers would lose jobs.

Levy warned that if mining companies hired new employees later the current workers would kill them. Healy said platinum producers would need to start implementing retrenchment processes. – Bloomberg Additional reporting by Sapa


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