Eskom strike: metal prices eyed

Johannesburg - If a strike in the energy sector drags on for longer than a week and results in power outages, it could have a critical impact on the mining and manufacturing sectors, economists and analysts say.

Mark Rule, an analyst at BoE Asset Management said: "The threat of cutting the power has a big leverage on the market, but the stoppage of power is the critical component here."

"At this point in time we don't expect to see widespread load-shedding," said Elna Moolman, an economist at Barnard Jacob Mellet, in a Fin24.com podcast.

As a result, a strike including the National Union of Mineworkers' 16 000 strong outfit "will be very disruptive, but in the short term would be categorised along with the rest of the country's seasonal strikes", said Rule.

But the market will watch commodity prices - particularly of platinum group metals (PGMs) - closely if and when the strike takes hold on Monday.

"Unfortunately plan A in the mining industry is to shut down the mine once the power goes off," said Rule. Generators are used to a lesser extent in mining than in manufacturing.

Rule pointed out that platinum prices were trading at about $2 000 over a year ago, after load-shedding and the disruption of production had a significant impact on prices.

On Friday afternoon, platinum was up 2.5% at $1 264.50 per ounce and palladium 3% higher at $272 per ounce. Gold was trading down 3.41% to $959.62 per ounce.

But Moolman said: "The demand for many of the mining products is already under a lot of pressure - in other words, you don't quite have the same demand and supply balance as at the beginning of last year."

If the strikes result in power outages, Leon Louw of the Freemarket Foundation told David Mckay of Fin24.com that a halt in all forms of production in the economy would cost R155 per person per day.

- Fin24.com