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Zim crisis could push Pt to $1,500/oz Posted: Tue, 09 May 2006 [miningmx.com] -- IF it can sustainably improve the fortunes of its Marikana mine, Aquarius Platinum will make a profit from its mines from just platinum revenue alone. This excludes income from rhodium, to which the company is exposed, as well as palladium. Part of the reason for the company’s profitabiltiy is the appreciation of the platinum price which has increased to its current level of $1178.50/oz from $430/oz at the beginning of 2000. Analysts believe that platinum could push to $1,500/oz under certain conditions. According to Britain’s Johnson Matthey, a semi-fabricator and research house, about 53% of the world’s platinum demand in 2004 comprised of autocatalyst fabrication, the system attached to a car exhaust that absorbs noxious carbon emissions. Legislation imposing tighter standards on emissions is increasing demand for platinum, and palladium. The use of catalysts in diesel engine systems is also growing and it’s this demand that is giving platinum a kicker. Against this demand, and the willingness of jewellery fabricators to buy “into the dips” when the platinum price weakens, there is platinum supply that is failing to keep pace with demand. Of global supply, equal to about 6.59 million in 2005, 5.1 million oz is from South Africa. Strikes, technical problems, failures to implement projects have a profound ability to tip the scales in favour of a supply deficit. The political pressure on Zimbabwe’s platinum industry is another factor affecting supply. Steve Shepherd, an analyst for JP Morgan, believes there’s grounds for a 50% increase in the platinum price even from its current high levels if diesel demand and a crisis in Zimbabwe’s platinum production combine. In a note dated March 7, Shepherd said: “In this scenario, we believe we could see a substantial platinum price rise ... Our subjective view, taking account of potential investor excitement in this scenario, would be as much as 50%. In other words, instead of a $1,000/oz level as we see now, we could anticipate a $1,500/oz level”. For the platinum price to move to this level, analysts reckon the jewellery sector, predominantly in China where platinum jewellery is popular, would have to “give up metal”. “That would be a pity,” says Murray. “If we don’t produce more metal, there will be a structural deficit,” he says. “It would be tragic to kill Chinese jewellery because it saved the industry in the 1990s,” Murray says.Free news alerts: click here to subscribe
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