Platinum to Stay Precious Output Woes May Linger For Years in South Africa; A Move Above $2,000? By ALLEN SYKORA February 11, 2008; Page C7
Looking to wow your sweetie with a little bling this Valentine's Day? If the object of your affection has eyes for a platinum bauble, brace yourself for sticker shock.
Platinum prices, which jumped in January because of power-supply problems in South Africa, are going to continue rising and the end isn't yet in sight, analysts said. Platinum prices are up 24% since the end of 2007.
• Background: Platinum prices have surged to record after record amid power-supply problems in South Africa, which is a major producer of the metal. • What's Next: More records, it seems. Analysts say that the power-supply concerns will pinch output for quite some time and that speculators will likely hop in and keep prices elevated. Of speculators, one analyst says: "When they see new highs, new open interest and higher volume, they tend to join the party." • Bottom Line: Buy a box of chocolate for your Valentine, instead.The April contract on the New York Mercantile Exchange settled at $1,884 an ounce Friday; then, in the thinly traded electronic session after the daytime trade, platinum rose to a record of $1,892.80...
It was the seventh straight trading day that platinum hit a record, as these output disruptions may last for some time.
The concerns that there wouldn't be enough electricity to safely run mines in the African nation have been in the headlines for a couple of weeks and the market has rallied considerably.
"Producers in South Africa are still suffering from power constraints and as there is no quick fix, power shortages are likely to further impact platinum production and in our view, output reductions are yet to be fully priced in," Barclays said in a research report.
The supply losses come at a time when investment and fabrication demand are strong, said Carlos Sanchez, precious-metals analyst with CPM Group. Mr. Sanchez suggested a break above $2,000 is possible in the next 1½ months.
"I don't see the situation with power outages and concerns in South Africa being resolved anytime soon," Mr. Sanchez said.
In fact, he added, there are reports it may be as long as five years before the situation is settled.
The uncertainty about the availability of electricity compelled companies to halt output because of safety issues, as much of the mining is far underground. The uncertainty has also affected gold futures, but to a lesser extent...