[miningmx.com] – PLATINUM shares might be in the doldrums, but demand for platinum-backed exchange traded products (ETFs) as listed on the JSE has been enthusiastic.
This is unusual, partly because it’s hard to associate good news with the platinum market currently, especially on the demand side, and secondly as the trend for gold ETFs has been one of outflow this year.
According to Vladimir Nedelkjovic, head of ETFs and index products at Absa Capital, the recently listed NewPlat Exchange Traded Fund totals some 368,000 ounces of platinum as of today. When the product was launched last week, there was considerable interest although Nedelkjovic reckons the flows will be calmer now. “I think for now it’s a pattern of business as usual,’ he said.
“The attraction seems to be that it’s a nice diversification tool to platinum shares,’ said Nedelkjovic of NewPlat. “It also doesn’t form part of the institutional offshore allowance.’
In the view of Macquarie Research, there’s also plenty of knowledge in Johannesburg about where the platinum market is going. “South Africa accounts for the vast majority of global platinum stock market capitalisation and has a knowledgeable investor market,’ it said in a recent report.
Even at 368,000 oz, that is more than a fifth of the total holdings of global platinum ETFs. Compared against Absa Capital’s gold-backed ETF, known as NewGold and listed on the JSE for several years already, it is a worthy accumulation over a short space of time. NewGold accounts for only 2% of global gold ETF holdings while the JSE accounts for just 1.5% of global stock market capitalisation.
Of course, the gold-backed ETF market is highly liquid. As of May 17, some 20 gold funds held more than 72 million oz of gold, equal to 2,250 tonnes, which is nearly 80% of annual mine production, according to Macquarie Research.
It is a big market, but unfortunately for the gold price it has suffered significant outflows this year. About 427 tonnes – about 9% of annual supply/demand – has left the gold-backed ETF market as inflation is contained and the US Federal Reserves’ strategy of quantitative easing may be curtailed.
Platinum market watchers, however, see a real prospect of a market deficit this year in platinum. There are even faint stirrings of industrial demand from Europe which is thought to be the real catalyst for a strong upward movemment in the platinum price.
According to a report by Bloomberg News, European car sales rose in April for the first time since September 2011. That’s potentially important for the platinum market as the metal is used in diesel-powered autocatalysts. According to the wire service, registrations of new passenger cars in the European Union increased 1.7% from April in 2012 to 1.04 million vehicles.
