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Platinum ETF will face resistance Posted: Tue, 14 Nov 2006 [miningmx.com] -- A LACK of market liquidity and resistance from automotive manufacturers would prove too large an obstacle to a platinum-backed exchange traded fund (ETF), said Johnson Matthey, the UK marketer and semi-fabricator of platinum group metals. Speaking at the launch of Johnson Matthey’s interim review, the report’s author, Tom Kendall, said the platinum market was smaller than the gold and silver markets. World platinum production in 2006 has been forecast by Johnson Matthey to reach an all-time record of about 7 million oz. But this is less metal than the world’s largest gold producer, Barrick Gold, is capable of selling. There might also be resistance from automobile manufacturers. “It would have to come from outside the industry. And there are no obvious sponsors,” said Kendall. The platinum price jumped nearly 5% to an eight-week high to more than $1,200/oz on November 3 on speculation that a platinum ETF was due to be launched. This would follow similar products backed by gold and silver. “Anything’s possible in today’s market,” said Kendall. “If the financial institutions could see a margin it might happen. But they would struggle to get it past the regulators in North America. The jury’s out on this one,” he said. About $500bn of investment was in various ETF products worldwide of which about $10bn was in gold ETFs alone. Kendall said South Africa, which accounts for about 80% of the world’s platinum production, would increase output 6% to 5.43 million oz in 2006. He was commenting on Johnson Matthey’s interim report, which forecasts supply and demand figures for the platinum and palladium markets. Platinum production – fired by expansions by South African producers - would be at a new high, but demand would keep pace. However, the supply deficit, the shortfall in supply against higher demand, would narrow to 20,000 oz in 2006 from a deficit of 40,000 oz in 2005. This was despite 5% growth in platinum demand mainly owing to consumption in diesel autocatalysts. The use of platinum by jewellers fell significantly owing to price volatility. “With platinum prices high and volatile, manufacturers and retailers in all major regions have cut back inventories,” said Johnson Matthey. “While in China and Japan, recycling of old stock has also continued to affect the amount of new metal purchased,” it said. The platinum price burst through $1,300/oz in May from $1,000/oz at the beginning of the year. Johnson Matthey said the platinum price could test $1,200/oz in the next six months but was most likely to trade between $980 and $1,200/oz. Platinum consumption in autocatalysis was led by growing production of diesel automotives, particularly light vehicles. Autocatalyst platinum demand is now expected to grow to 4.38 million oz in 2006 from 3.82 million oz in 2005. Palladium was expected to trade between $260 to $380/oz. Kendall said price upside for palladium was limited set against a supply surplus of 1.63 million oz. Even discounting supplies from Russian inventories, which Kendall said was inscrutable, a significant surplus “of several hundred thousand ounces” would exist.
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