JM bullish on platinum

[] — UK precious metals refining and marketing group Johnson Matthey (JM) expects the price of platinum to remain between $1,600/oz and $2,000/oz during the next six months as rising demand outpaces a steadier growth in mine supplies.

Key assumptions are that interest rates remain low and the gold price stays at its current elevated levels.

JM said in its just released Platinum 2010 review that investment activity was a major factor in the platinum market “with net long speculative futures positions at high levels and total ETF (exchange traded fund) holdings becoming even more substantial since the launch of the United States ETF early in 2010.”

The report highlighted record demand for platinum for jewellery manufacture in China which reached 2.08m oz in 2009.

Reasons were the booming Chinese economy and the drop in platinum prices on average compared with 2008. Rebuilding of stocks of metal and finished jewellery throughout the trade contributed to the increase.

“Gross purchases of platinum for jewellery demand climbed by 46.1% in 2009 to 3.01m oz world wide. The reduced value of platinum led to a fall in recycling of scrap jewellery by 18.7% to 565,000oz resulting in net global demand of 2.445m oz, a rise of 79.1%, ” the report said.

Overall, JM expected the platinum market “to be close to balance in 2010′ compared with 2009 when the firm reckoned there was a surplus of 285,000oz following on from the deficit of 220,000oz estimated for 2008.

Turning to palladium JM said it believed the palladium market was likely to be in oversupply again in 2010 “although with a smaller surplus than in 2009.’ According to JM there was a palladium surplus of 760,000oz last year.

JM’s outlook on palladium is far more bearish than predictions made earlier this year by Impala Platinum marketing executive Derek Engelbrecht and UK metal consultancy GFMS..

Both those commentators said the palladium market would be in deficit during 2010 with Engelbrecht looking for a deficit of up to 810,000oz.

JM qualified its view stating, “Excluding sales of metal from Russian state stocks the market has been in fundamental deficit during the last two years and recent price movements indicate that many investors see potential long term profits in this metal.

“If investors continue to build on their large futures and ETF positions, then recovering industrial and automotive demand could help to drive palladium to $700/oz in the next six months, with the price unlikely to soften below $475.’