The 21-week strike in South Africa’s platinum mining sector could be set to end with the three affected mining companies announcing late on June 12 that they have reached an informal deal with the main mineworkers’ union.
In a combined statement, the platinum producers, Anglo American Platinum (Amplats), Impala Platinum Holdings Limited (Implats) and Lonmin, said that ‘in principle’ undertakings have been reached with the leadership of the Association of Mineworkers and Construction Union (Amcu), in respect of wages and conditions of employment.
Local media reports report Amcu has put the proposal to its members and the union has said it will respond to the mining companies on June 13. The principles underlying the proposal include an annual increase of R1,000 ($93) per month in basic pay for A- and B-band employees for two years and R950 thereafter and increases of 8 percent per year for officials, artisans and miners for two years and 7.5 percent thereafter.
Earlier this week, platinum group metals spiked higher after South Africa’s Minister for Mineral Resources, Ngoako Ramathlodi, pulled out of the mediation following wage negotiations ending in an impasse on June 9. The Inter-Governmental Technical Task Team set up by the minister on May 28 in an effort to resolve the deadlock also was dissolved.
July platinum on the Comex division of the New York Mercantile Exchange (Nymex) reached a session high of $1,485.80 an ounce on June 10, a gain of some 8 percent since the beginning of the year. By close at midweek, the July contract had eased back a tad to settle at $1,481.10.
Palladium futures, meanwhile, settled at $860.15 an ounce on June 11, less than $5 off the all-time record of $865 reached in February 2011. Spot palladium was fixed on London’s Platinum and Palladium market at $858 an ounce in June 12’s morning fix.
After news of the informal deal, U.S. platinum and palladium futures were trading sharply lower on Comex. At time of writing, July platinum had touched a session low of $1,436.70 and September palladium a low of $818.70.
The strike, which began on Jan. 23, has so far cost the three platinum producers more than R22.2 billion ($2.07 billion)in lost revenue and employees some R9.8 billion in lost earnings.
Amplats, Implats and Lonmin’s strike-hit South African mining operations account for 40 percent of world platinum supply while South Africa and Russia between them supply over 80 percent of the globe’s palladium.
The relatively subdued price reaction, particularly of platinum, until this week to the production outage was due largely to ample above-ground stocks. The three companies have not disclosed details of their current stock levels. Even when the affected mines resume production, the producers say it could take as long as eight weeks for the processing pipeline to be restocked for some metals.
Worries about Russia’s involvement in Ukraine and how the political fallout could hit Russia’s exports of palladium were a major driver of the upward spike in palladium prices since March until the recent easing of tensions.
Brent & U.S. crude soar on Iraq violence
Prices for Brent crude, the international oil benchmark, headed towards $112 a barrel and U.S. crude also soared amid the escalating violence in Iraq. Iraqi Kurdish forces on June 12 were reported to have taken full control of the northern oil city of Kirkuk while the previous day militants from the Islamic State in Iraq and Syria (ISIS) seized control of the northern Iraq cities of Tikrit and Mosul.
Analysts say there are fears in the oil market that the violence could spread to the country’s main oil producing fields in the south, disrupting supplies of oil from the country.
Brent crude for July delivery soared to a session high of $111.79 a barrel on June 12 on London’s ICE Futures Europe exchange, the highest since March 3. July Brent had closed the previous day at $109.37 a barrel.
U.S. light, sweet crude – the West Texas Intermediate (WTI) – for July delivery on Nymex touched $106.52 a barrel in morning trade after finishing at $104.40 a barrel on June 11.
Iraq produced 3.06 million barrels of oil last year, according to U.S. Energy Information Administration (EIA) data. The country has been ramping up its oil production and its oil ministry had set a target for oil production of 4.1 million barrels a day by the end of 2014.
Iraq’s oil exports averaged 2.58 million barrels in May, up slightly on April’s shipments of 2.51 million barrels a day. All exports are currently via Iraq’s Arabian Gulf facilities as the country’s northern pipeline, which runs from the Kirkuk province to the Turkish Mediterranean port of Ceyhan, has been out of action since March 2 because of attacks by militants.
Reuters quoted Iraq’s Oil Minister Abdul Kareem Luaibi on June 11 ahead of a policy meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, in an attempt to reassure the industry, as saying the country’s
Iraq’s key southern oil field export facilities are “very, very safe,” Iraqi Oil Minister Abdul Kareem Luaibi said June 11 in a Reuters report. He was quoted ahead of a policy meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, in an attempt to reassure the industry. The bulk of Iraq’s oil production and export facilities are in the south of the country.
As expected, OPEC at its Vienna policy meeting kept the group’s 30 million barrels a day production target ceiling for the second half of 2014 unchanged.
