Platinum seen at $1500 by year-end amid South African power crisis - BofA

By Barani Krishnan 

Investing.com - Platinum prices are expected to rise to $1,500 an ounce by year-end, underpinned by the power crisis in South Africa as chronic electricity outages undermine one of the world's largest operators of mines, Bank of America said in an investors' note Wednesday.

"Power supply [is a] long-standing issue for South African miners," analysts at BofA Securities wrote in the note. "The power situation in South Africa has gained attention as power cuts have become more frequent."

South Africa is a key platinum supplier with a global market share of 75% and it wasn't surprising that platinum prices have remained resilient amid the nation's power crisis, the note pointed out.

Hosting Robert Baxter, CEO of South Africa's Minerals Council, to a fireside chat on the power crisis, BofA said it will take time to ensure stability in the country's electricity supply.

"Bringing power plants back from maintenance, solar water heaters and PV panel systems are among the options to alleviate pressure on the grid. In the medium term, the private sector must bring on capacity," BofA said.

In the meantime, national power Eskom needs to fix its asset base and sell all concessions of power generation capacity that it can't run, BofA said, adding: "Self-generation of power is [a] critical solution for miners."

Given that the crisis won't be resolved anytime soon, BofA said it was optimistic of a large rally in platinum prices by December.

"As such, we remain constructive on platinum and see prices rallying to $1,500/oz by year-end," the BofA note.

Platinum futures on New York's Comex were trading at just over $990 an ounce by 12:45 ET (16:45 GMT).