5 February 2008
Johannesburg — SA's electricity supply crisis is playing itself out on global markets, with the prices of platinum, palladium and coal hit ting record levels yesterday on fears that Eskom's power cuts to mines would disrupt supplies.
Platinum roared to a record high yesterday, with an analyst saying it could breach $2000/oz, while palladium hit a six-year peak. SA produces four-fifths of the world's platinum and is a big palladium suppler. The two metals are used in jewellery and in catalytic converters in vehicles.
Gold and silver lagged after setting new peaks on Friday, as the metals consolidated gains before resuming their march to new highs, analysts said.
"The platinum price has been driven to record levels by flooding and power shortages in SA. This has seen strong investor buying," said Tom Kendall, precious metals strategist at Mitsubishi Corporation.
"Although 90% of power has been restored to the mines, the impact on production has yet to be fully determined."
Platinum hit a high of $1789/oz before easing to $1786 in afternoon trade yesterday, against $1 752/$1 759 late in New York on Friday. Palladium rose as high as $420,50 and was last at $420/423/oz, versus $410/$413 on Friday, tracking the platinum price.
"This power crisis can place very high pressure on platinum, well above $2000/oz," Stephen Forrest, director of SFA Oxford, said at the Indaba African mining conference in Cape Town.
Forrest said labour problems in SA could help bolster platinum prices.
He forecast, however, that platinum would probably come down to an average of $1350 in the long term, in part because of rising fuel costs.
Coal also jumped to records at Richards Bay and Australia's Newcastle port as production was curbed by power cuts and flooding, while snowstorms disrupted mining and transport in China.
Coal at Richards Bay rose $12,20 or 12% to $111,30/ton, according to McCloskey Group figures. Power plant coal prices in Australia climbed $23,09 or 25% to $116,44/ton in the week ended February 1, according to the global COAL NEWC i ndex.
Worldwide supply of platinum will peak in 2013 and then decline, Forrest said, adding that mining projects in Zimbabwe could add to platinum supply if they were given the green light to proceed.
Anglo Platinum and Impala Platinum, the world's largest platinum producers, said yesterday their South African mines were running at full production after power cuts suspended operations last week. Both are operating with 90% of their normal power consumption needs, as agreed with Eskom.
Anglo Platinum resumed smelting and refining yesterday, while Impala was reducing power use at its mineral processing operations, which were not running at full capacity, mine officials said.
"It's premature to say at this stage what the production consequences of operating within the 90% power constraint is," said Anglo Platinum spokesman Trevor Raymond.
Mining analyst Wolfgang Wrzesniok-Rossbach, head of sales at Germany's Heraeus, said "One should not under- estimate the production loss and its implications on this year's supply- demand balance".
With about 15000oz a day lost to power cuts and another 50000oz-70000oz lost because of flooding at one Anglo Platinum mine, a total of 150000oz may have been lost. As a result, the annual deficit could climb above 400000oz, the highest in six years, he said.
Business Day Correspondent With Reuters and Bloomberg
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