LABOUR unrest in South Africa’s platinum belt spread on Wednesday, raising concerns that anger over low wages and poor living conditions could generate fresh violence after 34 striking miners were shot dead by police last week.
The strike that started last week at Lonmin’s Marikana mine has pushed up platinum prices and stoked worries about investing in Africa’s biggest economy, where chronic unemployment and massive income disparity threaten social stability.
The world’s top platinum producer, Anglo Platinum, said on Wednesday it had received a demand for a pay increase from its South African workers, while a trade union said miners at Royal Bafokeng Platinum’s Rasimone site were blocked from reporting to work by colleagues.
The labour troubles were touched off by a violent turf war between labour unions at the Marikana mine.
Ten people had been killed last week before police opened fire on striking miners on Thursday, shooting dead another 34 in the worst such bloodshed since the end of apartheid white rule in 1994. President Jacob Zuma has ordered an inquiry.
“Over the past couple of years, South Africa has witnessed a number of extremely violent strikes and protests partly due to worsening poverty, increasing social inequality, low wages, and poor social service delivery,” US-based Human Rights Watch said in a statement on Wednesday.
It urged the government inquiry to address the underlying social and economic issues fuelling the unrest.
Workers have trickled back to Lonmin’s Marikana mine this week, but most have stayed away for fear of being caught in the conflict between the long-established National Union of Mineworkers (Num) and the militant breakaway Association of Mineworkers and Construction Union (Amcu).
Zuma, who has appointed a panel to investigate the violence, has tried to reassure investors their money is safe while appealing to all sides to end the violence.
Zuma’s political foes have been piling pressure on the president. They accuse him and the ANC, which has placed several former Num members in senior government positions, of adopting poor policing policies and of not caring enough about workers labouring deep underground.
PLATINUM touched its highest and since early May on Wednesday was set for its biggest weekly gain in 10 months after signs of spreading unrest in top producer South Africa ignited concern among investors over supply, while gold gained for a sixth day.
The paralysed production at the world’s third largest producer has highlighted the reliance of the platinum market on South African supply.
The price of platinum leapt to its highest since early May on Wednesday, driven by concern about supply from South Africa, which holds 80% of the known reserves of the metal, which is used in jewellery and for catalytic converters in cars.
Spot platinum rose by as much as 1,5% to touch US$1 524,49 an ounce, trading at US$1 521,75 by 08.41 GMT.
The 9% 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 because of investor pessimism over the extent of the slowdown in demand particularly from the auto sector, where it is used in catalytic converters.
“Given that there are a lot of operations in the Rustenburg area, RBPlats, Impala and Lonmin have mines that are quite close together, it’s not surprising to see some spillover of the tensions,” David Jollie, an analyst at Mitsui Precious Metals, said.
“The level of violence is surprising. But the current level of disruption to the platinum markets doesn’t seem likely to put it into deficit, although it will move it closer towards balance,” he said. “But … if demand is still below the level of supply to the market and there is no further disruption… then there is no reason other than nerves and short covering why in the short-term prices should move much higher.”
Platinum’s main industrial application is in autocatalysts in diesel-powered vehicles, for which Europe is the largest market and where the eurozone debt crisis has forced many governments to impose austerity measures that have cut consumer spending, particularly for big-ticket items such as cars.
The platinum market is expected to show a surplus of anywhere up to 400 000 ounces this year, which is equivalent to nearly 7% of total net demand.
Platinum has traded at a historically large discount to gold this year of more than US$200 an ounce. This gap has narrowed in the last week to US$125, reflecting platinum’s outperformance over gold, which was also set for its longest unbroken rally in two months.
The gold price is set for a weekly gain of 2,5%, its strongest weekly performance so far this month, driven largely by the euro after media reports that the European Central Bank could act to stem the spread of the debt crisis by capping Spanish and Italian borrowing costs, which are around their highest since the launch of the single European currency.
The central bank has since denied any such plan, but the prospect of more liquidity to lower interbank interest rates has lifted financial markets, pushing US stocks, with which precious metals are strongly correlated, to four-year highs.