Platinum deficit forecast for 2010

Allan Seccombe | Tue, 17 Nov 2009 15:03
[miningmx.com] -- THE INTRODUCTION of a platinum-backed exchange-traded fund (ETF) in the United States could add 200,000 oz of fresh demand to the market, which will be in a small surplus of 140,000 oz this year, Johnson Matthey said on Tuesday.

“Overall, the platinum market should tighten in 2010 and could move into a modest deficit as the world economy improves,” Johnson Matthey said in its 2009 interim platinum review.

This should support the platinum price, but many of the gains made in the price in the year to end-September have been fuelled by a weak US dollar and a strong gold price as well as investor interest in the metal rather than fundamental reasons.

Platinum could trade as high as $1,550/oz in the next six months if the gold price remains strong. If the dollar strengthens and investors sell out of gold, platinum could fall as low as $1,280 in the same period.

The review showed the platinum demand for this year sliding 4.4% to 5.92 million oz, with the auto sector taking a third less metal to make autocatalysts than it did the year before.

This was offset by an astonishing 80% uptick in demand for platinum in jewellery, rising a million ounces to 2.45 million oz, just shy of the 2.48 million oz the autocatalysts makers wanted this year.

The surprise figure is the expected 900,000oz of additional demand expected from China, lifting offtake to a record 1.75 million oz this year on the back of restocking by jewellers and consumer demand triggered by relatively low metal prices.

“Although we expect industry restocking to slow in the second half of 2009, consumer purchasing should still maintain demand at close to record levels,” Johnson Matthey said in its report.

There could be an additional offtake of platinum and that’s the proposed ETF in the United States, which is working its way through the regulatory process and should be available in the next five months or so.

This could result in the offtake of another 200,000 oz a year of platinum and palladium, Mark Bedford, director of precious metals marketing at Johnson Matthey, said at a presentation in Johannesburg.

Alison Cowley, principal analyst at Johnson Matthey, pointed out some US investors may have already given themselves exposure to platinum and palladium through the European ETF products, making it difficult to predict how successful a similar offering in the US would be.

Johnson Matthey forecast investment demand for platinum this year at 630,000 oz, up from 555,000 oz last year, with ETFs in Switzerland and the UK providing the growth.

A Japanese ETF launched this year has had little impact on the market, it said.

Looking at 2010, Johnson Matthey expects vehicle sales to rise, lifting platinum demand. The picture is hazy though because US and European governments will stop their scrappage schemes which encouraged consumers to trade in old cars for new.

Platinum supplies are forecast to increase next year after a modest two percent increase to 6.06 million oz in 2009. South Africa, which supplies most of the world’s platinum, should record sales of 4.73 million oz this year, a 210,000 oz increase.

The underlying story in South Africa is less positive, however. The tonnes of ore milled fell because of safety-related stoppages, industrial action and the closure of marginal operations, but this was offset by sales of stockpiled metal, an event unlikely to be repeated next year.

Not much more rationalisation of the South African platinum sector is expected next year and newer operations in the country and Zimbabwe are expected to contribute towards increased output. Johnson Matthey did not give a 2010 forecast.