Derek Engelbrecht, marketing director, Impala Platinum
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» Platinum ETF launch fails to ignite market
» Platinum ETF could thrust price above $1,450/oz
» ETF backer 'astonished' by producer ire
» A second platinum ETF drives prices
» Nobody would dream of ETF if prices were to fall - Liston Meintjes, Metropolitan
» Platinum producers spurn ETF plan

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US bank plans platinum ETF, $1,500 seen

Posted: Fri, 27 Apr 2007

[miningmx.com] -- A LARGE US bank is preparing to launch a platinum-back exchange-traded fund, which has the potential to be far larger than two European products, and could drive platinum to $1,500/oz, Impala Platinum marketing director Derek Engelbrecht said.

“To be successful, a platinum product must be launched in the United States,” Engelbrecht told Miningmx.

A large US bank contacted Impala this week to ask “how it would feel” about the launch of such a fund in the States, he said. “While it’s flattering to be asked, there is nothing we can do about it.”

“The concern we have is that if a big fund in the States decides to go for it, and the liquidity or backup needed to support that ETF is not there, then $1,500 is around the corner -- if a big fund wants to take it for a run,” he said.
$1,500 is around the corner
London-based ETF Securities has this week listed on the London Stock Exchange exchange-traded commodity instruments for platinum, palladium, gold, silver and a precious metals basket. The uptake was slow.

Platinum prices raced up to $1,400/oz last year on rumours that ETFs for the metal were to be launched. When news in recent weeks broke that two funds would be launched in Europe, the platinum price hovered around $1,300.

The price has since come off the boil after the slow uptake for the product. On the first day of trading, the ETF Securities product accounted for 82 ounces. There is the likelihood demand will increase as investors become more aware of the product and it has traded for a while.

GFMS reckons the platinum price could rise to $1,450 this year, driven by the gold price, which could break through $700/oz and approach $800, said the London-based metals consultancy’s Paul Walker.

An estimated 70,000 oz of platinum will be absorbed by the ETF Securities product in the first year. A similar amount will be taken up by Switzerland’s Zurich Cantonal Bank (ZKB) after it launches on 10 May.

“If 70,000 oz is taken up, it won’t have much impact, but if an ETF is launched in the States and the funds take it for a run then it’s going to be a different story,” Engelbrecht said, adding demand in the US could hit 500,000 oz.

Considering that physical stocks of platinum held by investors amounts to between 600,000 oz and 1.7 million ounces, the effect an ETF absorbing up to 500,000 oz would be obvious and immediately felt.

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The palladium market has, by way of comparison, seven to eight million ounces of stockpiled metal. An ETF would have only a small effect on the price.

“The liquidity for these platinum products is there as long as they remain fairly modest,” Engelbrecht said.

Impala thinks there has been de-stocking of some 250,000 oz of platinum in Zurich so far this year after a big movement of metal into the Swiss capital at the end of last year, and that stocks are now below a million ounces and closer to the lower end of the range, he said.

One of the theories is that Norilsk Nickel had borrowed platinum from the Russian Central Bank and moved it to Zurich in anticipation of not getting export licences and has been feeding contracts for those supplies.

Engelbrecht dismissed market talk that hedge positions by platinum producers such as Impala and Anglo Platinum, the world’s two largest suppliers of the metal, were behind their unhappiness about the ETF products.

“We are not hedged,” he said.

Reports that Impala, for one, would not supply metal for ETF products because it did not favour them were not entirely accurate, he said.

“We wouldn’t supply them because we simply don’t have the metal to supply. We are fully booked on our existing contracts. It’s not that we won’t supply, but that we can’t,” he said.

“There’s nothing we can do about it. I’m concerned about damage to the jewellery market. A volatile market is bad for the commodity,” he said.

GFMS said platinum jewellery manufacturing demand fell by eight percent in 2006 because of high and volatile prices. The outlook for this year is that demand will further decrease.