* South African platinum miners' strike enters 4th month
* Prices still lower than in early January
* Industry stocks still meeting need for metal
By Jan Harvey
LONDON, April 29 Platinum's price stability in
the face of the longest miners' strike in South Africa since the
end of apartheid is testament to the industry's success in using
stocks built up in advance to hold the market steady.
That's good news for consumers, but bad news for investors
looking for a payday.
Miners in the world's biggest platinum producer have been on
strike at Anglo Platinum, Lonmin and Impala
Platinum since Jan. 23, shuttering 40 percent of global
Under normal circumstances, such an outage might have been
expected to drive prices of the metal higher. However, platinum
, which is used chiefly in jewellery and as a catalyst in
vehicle exhausts, remains stubbornly lower, at $1,412 an ounce,
than on the first day of the strike, when it fetched $1,452/oz.
Analysts put it partly down to the availability of
above-ground stocks of the metal, which Citigroup estimated at 9
million ounces ahead of the strike, nearly a year's demand.
But who holds the stocks is as important as the size of
"There's a difference between the mining companies and car
companies, whose stockpiles are precisely there to be used up at
times of shortage, and investors, who have to be persuaded to
part with their holdings via a higher price," Macquarie analyst
Matthew Turner said.
"The fact that the price hasn't responded suggests to me
that it is those mining company and car company stocks that are
being used up at the moment. That's why the strike hasn't had an
The last few years has seen a significant pick-up in
investment demand for platinum, much of it physical.
A year ago Absa Capital listed Johannesburg's first platinum
exchange-traded fund, a tradeable security backed
by the physical asset that allows investors to bet on a rise in
the raw material without having to hold any.
In just four months it became the largest ETF of its type in
the world. Its holdings now top 1 million ounces, which is more
than twice the global level of investment in platinum for the
whole of 2012.
The stocks backing the fund could theoretically be released
back onto the market if supply tightens up, but the current
price environment doesn't suggest that's imminent.
"At these levels, prices are only just where they were when
the strike began, so it's hard to see why investors would choose
to release that material now," Mitsubishi analyst Jonathan
The higher prices that investors want would also be
appealing to mining companies, but price volatility isn't in the
interests of either producers or consumers - in platinum's case,
mainly European carmakers and the Chinese jewellery industry.
Price spikes make it harder for consumers to budget and
encourage substitution of cheaper metals, eroding long-term
The last time platinum prices jumped dramatically, to an
all-time high of $2,290 an ounce in March 2008, the threat to
South African supply from power constraints was to blame. Miners
and consumers have since taken steps to ensure that doesn't
CUSHION BUILT UP
Amplats said last month that it had stockpiles of some
430,000 ounces ahead of the strike, built up to cushion it from
supply threats, around half of which remained on March 31,
according to press reports.
If stocks run out, Amplats said, it would be prepared to buy
platinum to meet its contractual obligations if necessary.
However, there is no sign that this has been happening, nor that
producers have been borrowing the metal as an alternative to
"I would think a natural thing for a producer to do if they
were getting short of metal would be not to buy it but to borrow
it, either from the market or on a one-to-one basis with another
producer," Credit Suisse analyst Tom Kendall said. "But I
haven't seen any evidence of that yet."
"There hasn't been any of the kind of move in platinum
forwards or lease rates that you would expect to see if anyone
was coming in to cover a spot requirement."
Demand for the metal remains relatively soft. Offtake from
the European car market, one of the biggest consumers of
platinum, fell for a second year in 2013. That has kept a lid
firmly on prices.
Consumers also tend to be well hedged, according to industry
sources. Automakers in Japan tend to hold metal themselves, one
car industry source said, while European and U.S. manufacturers
are hedged through banks and trading houses who themselves hold
large stocks of metal.
"There seems to have been a pretty substantial accumulation
of inventory in Asia, particularly in China, in the form of both
jewellery and investment metal," Kendall said.
"We will need demand to pick up for a considerable period of
time to really tighten the market."
(Reporting by Jan Harvey; Editing by Veronica Brown and Will