GFMS sees firm platinum price

[] — GOLD Fields Mineral Services (GFMS) reckons the “gross surplus’ in the platinum market will remain at historically high levels in 2010.

That’s despite an estimated 5% rise in global demand as platinum consumption by autocatalyst and industrial users benefits from the improved economic outlook.

The GFMS view on platinum seems far more bearish than that given by Impala Platinum (Implats) marketing executive Derek Engelbrecht in February.

According to GFMS the platinum market jumped 47% to a “gross surplus’ of 849,000oz in 2009 because demand fell by 14% – or one million ounces (m oz) – to 6.41m oz which was the lowest level since 1999.

But GFMS then state that, “the size of the gross surplus in 2009 was contained by a near 800,000oz – or 10% – drop in global platinum supply. “

Some 60% of that fall was due to far lower supply of old jewellery scrap while mine production dropped 2% .

Engelbrecht told financial media on February 18 – when Implats released its interim results – that the platinum market showed a deficit of 245,000oz in 2009 and was headed for an even higher deficit of around 345,000oz this year.

Engelbrecht also expected the palladium market to swing from a surplus of 305,000oz in 2009 to a deficit of 810,000oz in 2010.

According to GFMS senior consultant Peter Ryan the palladium market had a “gross deficit of just 12,000 ounces’ in 2009.

Ryan did not give a specific number for his palladium forecast for 2010 and commented that, “looking ahead to this year, GFMS are forecasting a larger gross deficit although this should fall short of the deficits posted in recent years. “

Both GFMS and Implats did agree there was a surge in investment demand for both platinum and palladium driven by the ETFs (exchange traded funds).

Ryan commented, “from a price perspective GFMS are forecasting continued strength in palladium prices this year, for similar reasons as discussed for platinum.

“In keeping with its sister metal inflows into palladium ETFs this year, for example, have already eclipsed last year’s volumes with the new ETF Securities fund in New York accounting for over 600,000oz at the time of writing.’

Ryan pointed out the ETF Securities fund had also accumulated almost 340,000oz of platinum in less than four months.

He commented, “although platinum autocatalyst and industrial demand should benefit from the improved economic outlook, GFMS believe that this will be partially offset by weaker jewellery demand, principally in China.

“This stems from our view that prices will remain at elevated levels boosted by a further rise in investment demand for commodities in general, as inflationary concerns continue to develop.

“At this stage therefore, GFMS are forecasting a modest 5% rise in global demand but its impact on the gross surplus will be offset by a recovery in global mine production and the resumption of an upward trend in autocatalyst scrap. “

Turning to palladium the GFMS report said, “global demand should benefit from a sharp recovery in autocatalysts, due to firm growth in every principal region.

“However, supply should also respond positively with gains across the board in mine production eclipsed by a surge in autocatalyst scrap supply in 2010.’