Commerzbank reports that platinum ETF holdings hit a record high of 198 million ounces yesterday, noting “platinum ETFs have been seeing noticeable inflows over the past few weeks.” Platinum ETF holdings are up 18% in the last three weeks, even as gold ETFs continue to see marked outflows.
Several factors play into this: Platinum demand in China has surged recently, as platinum jewelry becomes more fashionable. UBS reports that net platinum imports for China totaled 8.9 tonnes last month, a 29% increase year-over-year, and a 14% increase from March. Part of this increase was fueled by the mid-April drop in precious metals.
Labor unrest in South Africa is another factor. Strikes and labor violence last year in the nation dropped worldwide platinum production 10%, and worldwide palladium by 11%, underscoring the fact that 80% of all platinum mining occurs in South Africa. The current demands of labor unions in contract negotiations, combined with the low price of platinum making several mining operations unprofitable even now, virtually guarantees more work stoppages.
On a related note, President Mugabe of Zimbabwe, who recently seized 51% of all platinum mining operations in his country, is going ahead with the seizure of part of the land leased to platinum miner Zimplats. This has been used by some in the South African mining unions to call for seizure of mines in their country, or at least seizure and nationalization of any mines that operators take out of production due to being unprofitable in the current economic climate.
Lastly, Russia (who owns most of the palladium deposits in the world) and South Africa announced that they are looking into forming a cartel to control the platinum group metals – a “PGM OPEC.”
All these factors point to a continued restriction in platinum supply, a situation that will only get worse if the automotive industries of Europe and China improve. It will take time for any idled mines to be brought back into production.