Platinum prices remain largely unmoved by the breakdown in wage talks aimed at ending South Africa’s mine workers’ strike. But palladium is trading near 32-month highs on fears of potential supply disruptions. Among soft commodities, Brazilian crop losses and weather risks continue to support arabica coffee and raw sugar futures.

The South African platinum miners’ strike continues after the latest round of wage talks broke down last week. The labour dispute has halted production at mines owned by the world’s three biggest platinum producers since Jan. 23 and has cost the companies more than R15.8 billion ($1.5 billion). South Africa produces around 40 percent of the world’s platinum but the labor dispute has had limited impact on prices as the industry was able to build up stocks ahead of the strike.

Platinum’s spot price stood at $1,417 an ounce in London’s am fix on May 1, less than on the eve of the strike when it moved up to $1,458. Spot prices spiked to a five-and-a-half-month high of $1,484 an ounce in early March after an earlier round of wage talks collapsed. Geopolitical concerns after Russia first sent its troops in eastern Ukraine also contributed to the price hike.

Platinum futures for July delivery on the Comex division of the New York Mercantile Exchange (Nymex) finished at $1,427.90 an ounce on April 30, up $3.6 on last week’s close.

The affected producers, Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin, whose talks with the Association of Mineworkers and Construction Union (Amcu) ended in stalemate last week, are now putting their latest pay offer directly to the mine workers, despite the objections of the union.

The three producers said in a combined statement on April 29, that they had been advised by Amcu that the union “continues to consult with members on the revised offer tabled by the producers on April 17 and is seeking a ‘fresh mandate’ from its members”.

The latest settlement offer tabled by the producers (on April 17) has narrowed the gap between the two sides, however. The offer would see the minimum cash remuneration (comprising basic wages and holiday, living-out and other allowances) for entry level underground employees rising R12,500 ($1,185) a month by July 2017. But Amcu wants basic monthly pay, excluding bonuses, of R12,500 a month in four years.

According to some local reports, Amcu workers reportedly are prepared to strike six months to get their wage demands met, although many analysts believe this unlikely.

In contrast to platinum, palladium prices are continuing to move up, supported by tensions surrounding Russia’s involvement in eastern Ukraine with the backdrop of South Africa’s continuing mine strike adding further impetus. More than 80 percent of global palladium production is concentrated in South Africa and the Russian Federation, with Russia accounting for nearly half of total palladium supply.

Worries about a potential disruption to supply of the metal from Russia in retaliation to western sanctions at a time when South African mine production is entering its fifteenth week of outage is driving the price higher. But analysts report supplies of Russian palladium remain steady.

“Fears over the impact of potential sanctions on Russia remain just that, with fear trumping reality in terms of availability of Russian palladium…for the moment at least! “ Standard Bank commodities strategist Leon Westgate said in the bank’s Global Commodities Daily note on April 30.

Spot palladium reached $815 an ounce in London’s pm fix on May 1, up $10 on the pm fix at the end of last week, and its highest level since late July 2011. Worries over Russia had pushed spot palladium to $813 an ounce on April 14.

Palladium for June delivery on Comex settled at $812.50 an ounce on Apr 30, a tad up on last week’s finish of $811.20 and close to the $816.30 ounce settlement peak on Apr. 14, which marked the strongest close for a most-active contract since August 2011.

Gold & copper move lower

Gold extended losses this week after the U.S. Federal Reserve’s policy statement on April 30 in which the central bank said it would reduce further its $65-billion-a-month economic stimulus program. The Fed said it will cut its monthly bond-buying to $45 billion amid brightening prospects for the U.S. economy. This is the fourth cut since December, but was in line with market expectations.

Gold for June delivery on Comex closed at $1,295.90 an ounce after the Fed statement, down $0.40 on the day. In early trade on May 1, the precious metals’ most-active contract was trading near last week’s 10-week low of $1,277.60.

Copper edged lower to touch a two-week low on May 1 following the Fed’s decision to trim further its monthly bond-buying program and downbeat data from China. Copper for July delivery on Comex dipped to a low of $3,003 a pound in early trade on May 1. The metal had closed $45 down at $3,028 on April 30. On the London Metal Exchange (LME), benchmark three-month copper finished at $6,710.50 a tonne, unchanged on the day.

China’s official purchasing managers’ index was marginally higher at 50.4 in April compared with the previous month’s 50.3, the country’s National Bureau of Statistics reported on May 1. A number above 50 indicates expansion. The data suggests a marginal improvement in China’s manufacturing sector but is hardly a rebound, say analysts. China is the largest consumer of copper, accounting for around 40 percent of global consumption last year.

U.S. crude oil prices fell further this week on expectations and subsequent confirmation of another climb in the country’s crude inventories. Another 1.7 million barrels was added to the U.S.’ commercial crude stocks in the week ending April 30 to take the country’s total commercial crude inventories to 399.4 million barrels, the highest level on record, the country’s Energy Information Administration (EIA) showed in its latest weekly report released on April 30.

The U.S. crude benchmark on Nymex, the West Texas Intermediate (WTI) for June delivery fell to finish at $99.74 a barrel after the EIA report was released. The June WTI contract had finished last week at $100.60.

Brent crude prices, meanwhile, eased back from the rally that took prices to $110 a barrel last week on the ICE Futures Europe exchange. By April 30, Brent for June delivery on ICE Europe had slipped to close at $108.07 a barrel.

Analysts said that much of the upward momentum had been deflated as Libya prepared to resume oil exports from the eastern port of Zueitina, which along with three other eastern ports, has been blockaded by rebels since last July.

ICE arabica coffee eases back

Arabica coffee futures retreated from the 26-week peak reached last week amid a wave of investor selling to take profits but continued to demonstrate the volatility that has become a feature of the market in recent weeks.

Arabica futures on New York’s ICE Futures U.S. rallied to $2.1892 a pound on April 23 following two bullish crop forecasts for leading grower and exporter Brazil. Extreme hot, dry weather in southern areas of Brazil earlier this year is expected to reduce the size of the 2014-2015 (April 1-March 31) crop.

This week July arabica coffee futures settled at $2.0513 a pound on April 30 on ICE Futures U.S., after soaring 4.5 percent the previous day to finish at $2.1018 a pound.
The Brazilian harvest is underway but arabica coffee futures are expected to remain volatile as the harvest progresses and until the extent of the crop losses become clear.

“Whilst there is a general consensus that the production potential of the 2014-2015 Brazilian crop has dropped by some 10-20 percent, to near 28-30 million 60-kg bags,“ Netherlands-headquartered Rabobank said in its latest Agri Commodities Monthly. “There is still a lot of weather to get through before picking and drying is complete and weather will be the key driver of prices in the short-term.”

Weather risks are also continuing to support raw sugar futures. Brazil is the world’s largest sugar producer and exporter and its main sugar growing area in the country’s Center-South region was badly hit by extreme hot, dry weather conditions in January and February. An El Niño weather event, which is forecast to start in July, may cause wet conditions which could interrupt the Brazilian harvest from September. However, unlike arabica, plentiful exportable stocks will cap any upside from weather influenced rallies, analysts say.

Raw sugar for July delivery on ICE Futures U.S. settled at 17.76 cents a pound on April 30, down marginally on last week’s finish of 17.85 cents. The most active ICE raw sugar contract reached a four-month high of 18.47 cents a pound on March 6 at the height of the worries about drought-related crop damage in Brazil. In mid-December, it had sunk to a three-year low of 15.86 cents a pound weighed down by burgeoning global inventories.

Cocoa futures finished higher at midweek, clawing back losses over the past week. Prices had come under some pressure on the back of plentiful supplies arriving at ports in top grower Côte d’Ivoire despite a likely global deficit.

Cocoa for delivery in July on ICE Futures U.S. had dipped to $2,948.50 a tonne by last week’s close, more than $78 below the two-and-a-half year peak of $3,027 reached on March 11. At midweek, July cocoa rallied to close $9.5 up on the day at $2,964 a tonne, helped by the prospect of the El Niño weather currently forecast to start in July that could potentially hurt production in Indonesia and West Africa.

While care has been taken to ensure that the information contained in this report is accurate, it is supplied without guarantee. The author can accept no responsibility for any errors or any consequence arising from the information provided.