* Prices stagnant throughout strike due to high stocks
* Producers' metal stocks seen petering out in 6-8 weeks
* Platinum eyeing $1,500/oz, though $1,600/oz 'a struggle'
* Metal still plentiful throughout supply chain -analysts
By Jan Harvey
LONDON, May 30 Platinum prices, undisturbed by a
South African mine strike now in its fifth month, could soon
begin to rise as the metal stocks built up by producers in
anticipation of the strike finally run low.
While market watchers estimate that the strike - the longest
and costliest in South African history - could cost a million
ounces of lost output this year, spot platinum remains
where it was when the strike broke out in January, at $1,450 an
The action, by workers at Anglo American Platinum,
Impala Platinum, and Lonmin, has taken out 40
percent of global production of the precious metal, which is .
Analysts have attributed the dormant price to the abundant
stocks held by producers, which they were able to drip-feed
through to consumers, cushioning them from the strike's impact.
But that cushion is getting thin.
"We probably have another 6-8 weeks to go before producers
run really low on material they've stockpiled," said Standard
Bank analyst Walter de Wet. "Lonmin have come out to say that
they have some stuff in the pipeline that they are processing,
and it seems there is some material at Impala and Anglo, too.
Anglo on average probably has the most metal compared to the
Prices are already showing sensitivity, hitting eight-month
highs last week after Impala's chief executive said last
Thursday that the strike could last "much longer".
Analysts say they could bounce back above $1,500/oz, a level
not seen since last September.
That is still only a modest rise - and well short of the
peaks seen in 2008 - as demand is tepid and there is still
plenty of metal throughout the supply chain.
In 2008 the threat to South African supply of power outages
sent the metal to a record $2,290 an ounce, against a backdrop
of much more buoyant demand.
"As soon as prices get above $1,500 an ounce, from a
risk-return perspective, buying platinum is less attractive in
the current environment," de Wet said. "It will be a real
struggle to get to $1,600, though that is possible."
"When things tighten up, they tend to do so quite fast. We
haven't been at that point just yet, and I think we'll have to
see a substantially longer strike for this market to tighten up
on a sustainable basis. There's obviously excess metal around."
In addition to producers, some stocks remain in the hands of
consumers, he added. The strike was heavily trailed towards the
end of last year, giving end-users plenty of time to build up
inventories of their own.
"Stocks are held throughout the chain," Investec analyst
Marc Elliott said. "It's not just the producers, it's the
consumers, the processors."
"I understand sponge is trading at a small premium to ingot,
so ingot is being converted into sponge, suggesting sales of
stored-up metal to meet demand. But basically, all parties were
able to make sure they have lots of platinum."
The main consumers of platinum are carmakers - which use
the metal as a component in catalytic converters, particularly
in the diesel-centric European market - and jewellers,
especially in China.
The latter accounts for more than a fifth of all platinum
demand, while European autocatalyst demand makes up another 18
percent. Neither of these demand segments are likely to drive
prices much higher, analysts say.
Europe's car demand has been under pressure since the
sovereign debt crisis hit the bloc. Analysts said discounts and
government incentives are still propping up car sales in a
market expected to show only modest growth this year after six
straight years of contraction.
Meanwhile, analysts report that Chinese jewellery demand has
become increasingly price sensitive. Imports of platinum into
China fell 30 percent in April, data from the customs office
As talks to find a solution to the strike restarted on
Thursday, South Africa's finance minister said ending the
strike, which threatens to push the continent's most advanced
economy into recession, is critical.
Even if it is ended now, it will take time to ramp
production back up to the levels seen late last year.
"The realisation is that the strike, and the impact of the
strike, isn't going to suddenly be over," Macquarie analyst
Matthew Turner said. "Some stocks have been sold, and given the
lack of price action I assume those are stocks held close to the
supply chain. It also looks as though Chinese imports have been
a lot weaker in May, so some of the slack will have been taken
"But clearly, when we're probably approaching the best part
of a million ounces of lost production by the end of the month,
then it will have an impact."
(Reporting by Jan Harvey; Editing by Will Waterman)