Global Precious MMI: PGMs make gains after South Africa outages

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The Global Precious Monthly Metals Index, a basket of precious metals, gained five points for a January MMI reading of 110.

Platinum, palladium prices rise after South Africa outages

Palladium and platinum prices received a boost last month after outages at South African mines, MetalMiner’s Stuart Burns explained.

“Power cuts earlier this year pushed the country close to recession,” Burns wrote. “The most recent outages have intensified over the last 36 hours, as heavy rains have flooded some power stations.

“Multiple failures affecting about a quarter of the country’s power plants have forced the utility to introduce severe rolling ‘stage 4’ cuts of 4,000 megawatts of power on Tuesday of last week, but it was still scrambling to fix breakdowns affecting another 15,000 megawatts — roughly a third of its generating capacity — by the end of the week.

“The rolling blackouts were escalated to stage 4 on Friday last week, with a rise to stage 6 (a complete loss of power) bringing many mining companies to a complete halt.”

Among the firms impacted by the outages was one of the world’s largest platinum producers, Sibanye-Stillwater.

Potential supply disruption in Zimbabwe

Elsewhere in Africa, Burns delved into potential complicating factors in Zimbabwe that could throw a wrench into the PGM mining sector there.

“An important source of precious metals — and in particular, Platinum Group Metals (PGMs) — is in a spiral of diminishing returns and could run out of cash in 2020 with consequences for metal supply and market prices,” Burns wrote.

“Zimbabwe has been here before, it must be said.

“Ever since its corrupt and ineffectual leader Robert Mugabe was thrown out a shade over two years ago, the hope has been his replacement Emmerson Mnangagwa would enact reforms that would reverse the decline and root out corruption. While Mr. Mnangagwa has made some positive changes, unfortunately, his administration hasn’t shown the greatest competency.”

According to the Observatory of Economic Complexity, Zimbabwe exported $145 million worth of precious metals in 2017. If unrest rises as a result of economic and labor conditions, PGM exports could be impacted, Burns noted.

“If PGM exports were disrupted due to extended public unrest, the platinum supply market would still function,” he wrote. “Zimbabwe’s production at some 11 tons per year is a tenth of South Africa’s 110 tons and only half Russia’s 25 tons, but it remains more than the U.S. and Canada combined, so any serious disruption would create support for higher prices next year.”

Precious metals prices rise amid geopolitical tensions

Tensions between the U.S. and Iran have seen precious metals prices increase to start the year.

That trend also held in India, as MetalMiner’s Sohrab Darabshaw explained.

“Multiple reasons are being attributed to the price rises, first and foremost being rising geopolitical tensions following the U.S. airstrike that killed top Iranian general Qassem Soleimani,” Darabshaw wrote. “Other factors include the fall of the Indian rupee versus the U.S. dollar in currency markets following the rise in the price of petroleum products.

“As trends show, gold is normally considered to be a safe-haven asset in times of political or economic strife, as investors and even everyday buyers back off from buying equity or trading in currencies.”

Actual metals prices and trends

The U.S. silver ingot/bars price rose 5.6% month over month to $17.89/ounce as of Jan. 1.

U.S. platinum bars rose 7.1% to $956/ounce. U.S. palladium bars rose 3.9% to $1,887/ounce.

Chinese gold bullion jumped 4.4% to $49.19/gram, while U.S. gold bullion increased 4.2% to $1,515/ounce.

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