AFRICA INVESTMENT-South Africa's gold talks sway platinum price

JOHANNESBURG/LONDON Sept 5 Thu Sep 5, 2013 10:07am EDT

JOHANNESBURG/LONDON Sept 5 (Reuters) - South Africa's platinum producers may have been the unintended beneficiaries of deadlocked wage talks and a strike in the country's gold mines, but they equally risk losing ground as negotiations show signs of making headway.

If the bullion strike ends sooner than expected, the platinum celebration may be short-lived.

The price of the white metal used for making emissions-capping converters in cars rallied strongly from mid-July onwards, in part because markets anticipated supply disruptions in the event the gold strikes spread to platinum.

The National Union of Mineworkers (NUM), seeking wage hikes of up to 60 percent, launched the gold strike on Tuesday.

The rival Association of Mineworkers and Construction Union (AMCU), the dominant labour force in the platinum belt, has not walked out of the gold shafts but wants increases as high as 150 percent from bullion and platinum producers.

"The platinum market is taking a cue from the general labour situation in South Africa, which is a dominant producer of platinum," said Grant Sporre, an analyst at Deutsche Bank.

"It's the same unions that are negotiating in the gold sector as the platinum sector, so if the mood is fairly militant and fairly uncompromising in one sector, the read-through might be the same for the other," he said.

Platinum's price, long depressed in the face of sluggish demand from its key European market, has been rallying since the South African mining sector wage talks kicked off two months ago, adding 15 percent over that time.

That helped boost shares of the country's hard-pressed platinum producers. Their gains have in fact been outpacing the spot price.

Anglo American Platinum, the world's top producer, has soared 42 percent since the start of July, Lonmin has added 41 percent and Impala Platinum is up 26 percent.

It is easy to see why - that is, if you bet the platinum price will rise on South African supply concerns but ahead of strikes in the industry, so producers can reap the benefits now.

South Africa accounts for 75 percent of global platinum output but only six percent of gold production, so the price of the former is heavily affected by the labour scene and domestic stoppages, or the threat of them.

Gold's price is far more influenced by changing perceptions of its status as a safe haven or inflation hedge, while platinum, with its heavy industrial use, is far more prone to move on supply concerns.

South Africa lost at least 750,000 ounces of output last year to strikes, shaft closures and government-ordered safety stoppages, metals refiner Johnson Matthey said in a report earlier this year.

The estimate - higher than others - highlighted the gravity of a wave of illegal strikes, rooted in a union turf war between NUM and AMCU, that hit the sector last year and triggered violence which killed over 50 people.

Signs that South Africa's gold strike may end sooner than expected, with NUM signaling a willingness to lower some of its demands, have also spilled over into platinum, which fell 2.5 percent on Wednesday, its biggest one-day loss since late June.

"You can in part attribute that to the fact that this gold strike doesn't seem to have legs," said Matthew Turner, an analyst at Macquarie.

That may bring relief to gold producers hit by the strike such as Harmony Gold and AngloGold Ashanti, which saw their share prices rally over 6 percent on Thursday.

But their gain may herald renewed platinum pain.

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