By Jeffrey Cox | Special to CNBC
22 Feb 2008
Power supply issues in South Africa have led to a very interesting opportunity for risk-embracing investors ? and potentially very large headaches for auto manufacturers.
At a time when metals have been the hottest properties on the sizzling commodities markets, platinum has emerged as the flavor of the month, with prices hitting historic highs and some analysts projecting more spikes to come.
The reason: mines in South Africa have been hit with rolling blackouts after power disturbances in the country last month. The result has been a sharp drop in platinum supply, while demand escalates.
Spot platinum hit another record high Friday near $2,200 an ounce before profit takers moved in to send the price lower. Until the situation in South Africa, which produces 75 percent of the world?s platinum, gets straightened out, the end may not be in sight.
“That just sent a shockwave through the platinum market,” said Jeffrey Christian, an analyst at CPM Group. “It’s a fundamentally driven issue. One of the fundamentals is you have a very small, illiquid market and a lot of investors pouring into it. That’s really what’s been going on there.”
The news certainly has been good for investors willing to take a risk on always-volatile futures markets, with some analysts believing platinum is on its way to $3,000. But the situation with platinum lines up as a huge problem for auto manufacturers, who use the metal to make catalytic converters.
See the full article here.
