A Crisis Metal Hits Its Flashpoint

Going back to 2010, I’ve been predicting we could see a significant crisis in one particular metal.

Platinum.

This week, it looks as if that situation has arrived. With reports suggesting that continuing mine strikes in South Africa have pushed this market perilously close to big supply issues.

As I write, striking platinum miners are marching on government buildings in Pretoria. Demanding higher wages, as part of a labor action that has now seen mines idled for six weeks.

That’s prompted some of the world’s largest platinum suppliers to suggest that supply disruptions could be coming.

Last week, officials from the world’s second-largest platinum producer Impala said that the company’s above-ground platinum stocks are nearly depleted. The firm said it will be able to guarantee shipments to overseas customers only until the end of March. Then all bets are off.

We’re not far from that deadline. And with no solution to the mineworkers’ strike in sight, there’s a growing possibility of a force majeure on global platinum shipments.

If it does materialize, this could be one of the most significant events in natural resources for some time. According to figures released this week by the U.S. Geological Survey, South Africa produced 73% of global primary platinum supply in 2013. There are simply few other markets where world production is so concentrated in the hands of one nation.

The situation is especially dire considering who produces the rest of the world’s platinum. A full 19% of global mine output comes from Russia and Zimbabwe–meaning that 92% of supply comes from just three places on Earth.

None of these nations are currently looking like great places to grow production. In fact, output from all of them except South Africa has been largely flat the last few years.

Today’s labor unrest thus has the very real potential to up-end the platinum market. If it does, it will be a payday not only for investors in physical platinum–but also in the scarce platinum greenfields projects being developed in more-stable nations like Canada and Australia.

Here’s to big moments,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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