Platinum At 4-Month High On South African Labor Strife

Platinum rose to its highest level since early May on Wednesday and was set for its biggest weekly gain in 10 months as spreading labor unrest in top producer South Africa cast doubt over output for the year.

The white metal hit $1,526 a troy ounce Wednesday morning, its highest level in 15 weeks, before slipping back to trade at $1,512.50 a troy ounce. The 9 percent rise in price over the last week has made platinum the best-performing precious metal of 2012, after having been outpaced by silver and gold as weak demand from the European automotive sector, which uses the metal in catalytic converters, weighed on prices. In early August, platinum fell to a two and a half year low of $1,400 a troy ounce.

An outbreak of violence has paralyzed production at Lonmin PLC, the world's third-largest producer, and has highlighted the reliance of the platinum market on South African supply.

South Africa, which accounts for 75 percent of world platinum supply, has been roiled by violent clashes at three of its four leading platinum mines this year. A 12-day strike at a Lonmin PLC mine erupted into violence last week, which resulted in police killing 34 striking miners and wounding another 78. In the days preceding the shootings, 10 people were hacked to death, including two police officers.

The striking workers, mostly rock drillers, were demanding their wages be trebled from 4,000 rand ($481) a month to 12,500 rand a month. However, Lonmin says that when their bonuses and other allowances are included, the workers earn around 11,000 rand, with a nine-percent increase set to kick in on October 1.

While Lonmin said 33 percent of its 28,000 workers came to work Tuesday, slightly more than Monday, the mining giant warned that it would likely breach terms of its corporate debt because of halted production at its Marikana platinum mine.

However, as the nation prepared memorials for the 44 killed at Lonmin's Marikana mine on Wednesday, demand for higher wages spread to at least two other platinum mines in South Africa.

Anglo American Platinum, the world's top producer, confirmed Wednesday that it has received new wage demands from a group of its workers in South Africa, but said the official union was not involved in the request and there have been no work stoppages or threats of strikes, the Dow Jones Newswire reported.

"A group of employees presented management with a memorandum containing a broad range of demands last Friday," Anglo American Platinum said in a statement. It did not say at which facility the workers were employed.

Rock drill operators at Royal Bafokeng Platinum Ltd.'s BRPM mine in South Africa went on strike on Tuesday night, according to a report from I-Net Bridge. Royal Bafokeng Platinum reported a 60 percent drop in first-half earnings on Monday and said it was considering job cuts.

Platinum is one of the most labor-intensive metals to extract and the industry is no stranger to labor strife. Over the past couple of years, South Africa has witnessed a number of extremely violent strikes and protests partly due to worsening poverty and increasing social inequality.

Citigroup's Johann Steyn and Jon H. Bergtheil recommend getting into platinum exchange-traded funds, rather than individual equities.

They said that while any given company may suffer from "growing labor demands, aggressive union behavior, risks around the security of tenure, and other challenges related to mining in Southern Africa," a platinum fund instead reflects demand for the metal itself.

ETFS Physical Platinum Shares (NYSEARCA: PPLT) rose 0.91 percent, to $149.65, in Wednesday's morning trading. So far this year, the ETF has appreciated 8.42 percent.

By comparison, American depository shares of Lonmin PLC (PINK: LNMIY) has lost 36.59 percent since the beginning of 2012.