Does This Surprise Production Cut Explain PGM’s Weird Price Action?

Very notable price action across the platinum group metals complex the past weeks. With rhodium rising as high as $1,550/oz — up 19% from the $1,305 rates that prevailed last week. 

That’s the highest price since March 2012. And rhodium’s sister metal ruthenium followed suit, rising to near $100/oz — to its highest price since early 2013. 

So what’s going on?

Trading sources were unable to cite reasons for the sudden rise in PGMs. But events in the world’s top-producing nation this week may provide some clues. 

South Africa. 

Mineworkers union Solidarity announced Monday that major platinum miner Lonmin has suddenly launched a major round of layoffs. With 1,139 workers likely to be dismissed before Christmas. 

That news came largely un-telegraphed. With optimism having been rising in South Africa’s platinum sector after major miner Sibanye-Stillwater said last week it had avoided potential shutdowns at its local operations due to cost-cutting measures. 

But Lonmin is apparently not fairing as well. With reports suggesting that the company would place “a number of shafts under care and maintenance” due to rising costs and low platinum prices. 

Although the exact closure plans haven’t been specified, these reports suggest a significant amount of platinum production could be impacted. With by-product output of PGMs like rhodium and ruthenium potentially caught up in the cuts.

The timing of the big price jumps in these metals coincides notably with the announcement — raising the potential that PGM buyers are moving to secure supply ahead of a foreseen disruption. 

If so, this represents one of the first real “shots across the bow” in South Africa’s troubled platinum industry — and in the global sector. With low prices, tough regulation, and rising costs finally coming together to create concrete reductions in supply. 

Watch to see if this trend continues with further cuts at other operations — and for continued upward momentum in prices (and a start upward in the case of platinum) if some of South Africa’s 70% of global supply goes offline. 

Here’s to the reason why,

Dave Forest

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