FOCUS: Platinum Slides To Five-Week Low As Other Metals Fall, Amplats Workers Return
By Allen Sykora of Kitco News
Wednesday February 20, 2013 10:00 AM
(Kitco News) - Platinum futures fell to a five-week low Wednesday, pulled down by weakness in other metals but also taking an extra hit due to a pair of news stories in the last 24 hours – workers returning to their jobs at Anglo American Platinum (Amplats) and weaker European auto sales, traders and analysts said.
Technical-chart selling was triggered on the decline.
Around mid-morning in New York, platinum for April delivery was $58, or 3.4%, lower to $1,639.50 an ounce on the New York Mercantile Exchange. The metal fell as far as $1,637, its weakest level since Jan. 14. Sister metal March palladium was down $24.15, or 3.2%, to $740.
April platinum had risen from $1,542.40 at the end of 2012 to as high as $1,744.50 on Feb. 6, boosted in large part by ongoing supply issues in the key producing nation of South Africa, which accounts for some three-quarters of global mine output. Supply has been an ongoing worry for the market for some time, but was exacerbated last month when Amplats announced plans to close some output, pending negotiations with unions and the government. Also, risky assets in general – from industrial commodities to equities – have been rising lately.
Platinum was still as high as $1,735 five days ago. However, a number of analysts – although still bullish about the long term – have been cautioning lately about the potential for a corrective pullback, especially with speculative net length already at a record high as of the most recent Commodity Futures Trading Commission data through Feb. 12, meaning potential selling whenever traders would opt to exit those bullish positions. Just Tuesday, UBS lowered its one-month platinum forecast to $1,650 from $1,720 while leaving its three-month at $1,850.
At Wednesday’s session low, the April futures were down 6.2% from the peak earlier this month.
Several traders blamed some of the most recent weakness on spillover selling from a retreat below $1,600 an ounce in gold. “That’s putting continued pressure on precious metals,” said Afshin Nabavi, head of trading with MKS (Switzerland) SA. Further, other industrial metals such as copper have lost some of their recent upside momentum, said Sterling Smith, futures specialist with Citi Institutional Client Group. On top of all this, one U.S. trader of platinum group metals cited a stronger gone in the U.S. dollar, which tends to hurt commodities generally by making them more expensive in other currencies.
However, the losses in platinum so far Wednesday exceed that of gold, silver and the base metals.
The U.S. trader and Edward Meir, commodities consultant with INTL FCStone, cited a return by workers at Amplats. Operations previously had been halted by violence at the Siphumelele mine, which had provided a bid to the platinum market early Tuesday.
Also bearish news for platinum, Commerzbank added, was news this week that European Union car sales fell by 8.7% year-on-year in January to 885,159 units. The largest single industrial use for platinum group metals is auto catalysts. Further, Europe is especially important to the platinum market since diesel-powered vehicles are popular on the continent and this requires the use of platinum, whereas gasoline-powered cars more common in the U.S. and China can use less-expensive palladium.
“This constituted the weakest start to a year since records began in 1990,” said Commerzbank of the European auto data. “Car sales on a full-year basis had already plummeted by 8.3% to 12.1 million units in 2012, putting them at their lowest level for 17 years. The weakness is attributable to the recession in the southern EU countries which, ultimately, has also spilled over into countries such as Germany and France.”
Still, Nabavi suggested the declines in platinum group metals may be “short-lived” due to the South African issues.
“From the newswires, we’ve heard that a lot of the South African workers went back to work,” he said. “Still, there are tensions about job losses, etc.”
Commerzbank also commented that even though Amplats workers are back on the job for now, “that does not mean at all that the underlying causes have been resolved.”
Platinum has fallen though technical-chart support that Smith had put around $1,650. “The market does look heavy,” he said, noting that the recent highs may act as a double-top and the start of a head-and-shoulders topping formation on the technical charts.