Tuesday, 23 March 2010

World Cup could cause spike in metal prices

According to an article in The Times (20th March) some of South Africa's largest electricity consumers, including the mining industry, have been asked to reduce their usage during the World Cup to ensure there are no blackouts. The country has a severe electricity shortage and the arrival of an estimated 450,000 football fans is expected to increase strain on the grid.

Xstrata has said that it will move an annual maintenance programme at its energy-intensive ferrochrome smelters to coincide with the World Cup. The mining industry accounts for 15% of South Africa's electricity consumption, and has already experienced rationing from Eskom, the South African power utility.  At the start of 2008 the utility was forced to limit electicity supplies after heavy rain damaged coal stocks. Subsequent blackouts forced several of the country's largest miners, including Anglo American, Anglo Platinum and AngloGold Ashanti to shut down operations for several days. The mines remained rationed for several months, and the drop in production caused metal prices to spike, platinum rising by 24% in subsequent weeks, and ferrochrome doubling, South Africa accounting for nearly three quarters of global production of these metals.

So look out for further spikes in these metal prices if the World Cup leads to further overall shortfalls in electricity supply.

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