Palladium Tumbles With Platinum on South Africa Mining Accord

Jun 12, 2014 3:01 pm ET

June 12 (Bloomberg) -- Palladium futures plunged the most in 11 months and platinum tumbled as mining companies and union officials agreed on a wage pact to present to workers in a bid to end a 20-week strike in South Africa, a leading producer.

“In-principle undertakings have been reached” with the Association of Mineworkers and Construction Union, Impala Platinum Holdings Ltd. said on behalf of the three largest producers. The metals are used mainly in pollution-control devices in cars.

More than 70,000 people have been on strike since January. Several rounds of talks failed to end the impasse that idled 60 percent of output and caused the economy to contract in the first quarter. South Africa is the world’s top producer of platinum and second-biggest for palladium, which yesterday climbed to a 13-year high.

“As soon as the strike ends, it’s going to alleviate the supply concerns that a lot of the traders have,” Michael Smith, the president of T&K Futures & Options Inc. in Port St. Lucie, Florida, said in a telephone interview. “We should see some selloff from that.”

Palladium futures for September delivery dropped 4.7 percent to settle at $819.40 an ounce at 1:19 p.m. on the New York Mercantile Exchange, the largest decline for a most-active contract since June 26, 2013. Yesterday, the metal reached $864.60, the highest since February 2001.

Platinum futures for July delivery fell 2.7 percent to $1,441.30 an ounce, the largest decline since Sept. 20. The metal yesterday reached $1,488.40, the highest since May 23.

Trading Soars

Trading in the metals more than doubled compared with the average for the past 100 days for this time, data compiled by Bloomberg showed. Holdings in exchange-traded products backed by the metals rose to records this week.

Anglo American Platinum Ltd., Impala and Lonmin Plc expect to get feedback from the union tomorrow. South African government-led meetings ended June 9 without agreement. The AMCU is meeting members at various mines today to obtain members’ opinion on the proposal. The strike was the industry’s longest and costliest.

“Regardless of the outcome, this is being construed as a positive step forward, and bets are being taken off the table,” Steven Scacalossi, the global head for metals sales at TD Securities in Toronto, said in a report.

Demand for the metals will exceed supplies for the third straight year, according to data from Johnson Matthey Plc, which makes a third of the world’s catalytic converters. In China, the largest auto market, passenger-vehicle sales rose 14 percent in May, according to an industry group.

Bullish Outlook

“In the medium term, the fundamental outlook still looks bullish for the complex as any return to work by the miners will still see many months pass before we return to anywhere near normal production,” Scacalossi said.

Gold jumped the most in five weeks and silver rose to a three-week high as violence escalated across Iraq, boosting demand for the metals as a hedge. U.S. equities slumped, and crude oil climbed to an eight-month high,

On the Comex in New York, gold futures for August delivery rose 1 percent to $1,274 an ounce, the biggest gain since May 2. Earlier, the price reached $1,274.60, the highest since May 27 as the escalating tension in Iraq boosted haven appeal

Silver futures for July delivery gained 1.9 percent to $19.533 an ounce, the largest increase since May 12. Earlier, the price reached $19.565, the highest since May 22.

--With assistance from Phoebe Sedgman in Melbourne and Glenys Sim in Singapore.