SHARES in South African platinum group metal (PGM) mining firms could push higher in the short-term owing to metal supply constraints, said Bloomberg News.
“Given the Norilsk situation, I think PGM prices could rise further near-term,” David Aserkoff, a London-based JP Morgan Chase & Co. equity strategist, told the newswire in e-mailed comments. He was referring to flooding at the Russian miner’s Polar division earlier this month which is likely to knock out significant palladium and nickel production.
“Earnings expectations have increased quite significantly for 2021 due to the higher basket price,” said Seleho Tsatsi, an investment analyst at Anchor Capital in Johannesburg.
Royal Bafokeng Platinum has gained the most among its peers this year, soaring 75% as of Tuesday’s close. Anglo American Platinum is up 44% and Impala Platinum up 38%. Northam Platinum has gained 19% and Sibanye-Stillwater 17%, Bloomberg News said.
Aserkoff said the effects of long-term market forces would continue to buoy the sector, including issues such as energy transitions, low valuation multiples of PGM shares, and the PGM sector’s role as offering investors protection against weakening in the rand.
“I would be surprised if any pullback lasted longer than a month or two,” he said. “Moreover, given that the majority of global PGM production is in South Africa, any local issues, typically power or labour, will also push global PGM prices higher, a nice hedge.”