The price of platinum could spike during the Fifa World Cup next month, according to Shamim Mansoor, head of precious metals sales at ETF Securities Marketing.
Power constraints have been a major issue for miners in South Africa as the country’s state owned energy company, Eskom, has not been able to keep up with the rapid rise in South Africa’s demand for energy.
On Mansoor’s estimates it will be extremely difficult for Eskom to maintain full power supply to the mining industry during the Fifa World cup scheduled for June-July this year as increased demand for power from stadiums, broadcasting centres, base camps, hotels, restaurants and other service industries takes priority.
South Africa produces approximately 75 per cent of the annual global platinum production and the industry relies heavily on electricity, therefore any interruption or loss of electricity could have an impact on global platinum production.
Eskom, which supplies 95 per cent of South Africa’s electricity has committed to ensuring uninterrupted power supply for the Fifa World Cup. Therefore, if demand exceeds supply, load shedding on miners may be enforced.
Mansoor says: “On 24 January 2008 when Eskom instituted load shedding on the miners, ETFS Physical Platinum ETC went from USD158.44 per security, to a high of USD222.06 on 3 March 2008, an increase of 40 per cent. This is because electricity demand exceeded supply in South Africa and miners were forced to use only 90 per cent of capacity, thereby reducing production.
“With the World Cup being held during the South African winter, the use of electricity is likely to exceed the previous winter peak. This then begs the question whether current capacity will be able to accommodate heightened demand during the Fifa World Cup. To ensure there is an uninterrupted supply of electricity during the Fifa World Cup, load shedding is likely to be enforced again, and therefore there is a risk we will see another price spike.”