Johnson Matthey publishes Platinum 2005 – review of Platinum Markets
Improved jewellery and auto demand unlikely to lift Palladium price as excess supply continues.
The platinum market was more or less in balance last year and will remain so in 2005, according to Johnson Matthey (JM) in “Platinum 2005”, published today. With demand and supply both expected to increase moderately, the platinum price should continue to be supported around recent levels. The price of palladium, despite large increases in 2004 in its use for jewellery, autocatalysts and investment products, is likely to remain capped by excess supply.
Demand for PLATINUM in 2004 edged up by less than 1% for the second year in succession, rising by just 50,000 oz to 6.58 million oz. Mine supply rose by 300,000 oz to 6.5 million oz as South African output exceeded 5 million oz for the first time, resulting in a narrow deficit of 80,000 oz.
Demand for platinum for autocatalysts rose by 7% in 2004 to 3.51 million oz, spurred by growing European diesel car production and by tightening emissions limits for cars in Europe and for heavy vehicles in Japan. Industrial demand climbed by 11% to 1.53 million oz, mainly due to rising production of LCD glass in Asia. However, jewellery demand fell by 12% to 2.2 million oz. Manufacturers in China reduced purchases to just over 1 million oz in reaction to the high and volatile prices in March and April 2004, when platinum reached $937 per oz.
Supplies of platinum are forecast to expand in 2005, though by less than last year, largely as a result of Anglo Platinum scaling back its production targets in South Africa. Further increases in demand can be expected from the auto and industrial sectors. Purchases in 2005 to date by the Chinese jewellery trade suggest that platinum jewellery demand in China could match last year’s level; if so, the overall market for platinum will be more or less in balance.
This suggests that in 2005 platinum will continue to trade around levels seen in the first quarter of the year, when the price averaged $864 per oz. However, as in 2004, the actions of hedge funds and other investors, driven partly by their reaction to movements in exchange rates, could have an overriding effect on the price. JM expects platinum to trade between $830 and $930 per oz for the next six months.
Demand for PALLADIUM climbed steeply in 2004, rising by 22 %, or 1.18 million oz, to 6.6 million oz. More than half of this increase came from the jewellery sector, led by the rapid development of palladium jewellery manufacturing in China.
Autocatalyst demand went up by 10% to 3.81 million oz, as US car companies, having run down their palladium stocks in 2003, increased their purchases from the market. Electronics demand increased by 6% to 955,000 oz in response to the growth in sales of electronic consumer goods, while greater demand for palladium bars and coins in North America raised investment demand to 210,000 oz.
Jewellery demand rose nearly four-fold to 920,000 oz, of which 700,000 oz was consumed in China. Jewellery manufacturers and retailers were able to increase profits by selling palladium jewellery, which met a spreading desire for high purity white metal jewellery amongst consumers who cannot afford platinum.
Growth in demand however was almost exactly matched by a rise in supplies, with mine production in South Africa and North America increasing, a considerable volume of Russian metal being sold from stocks and greater recovery of palladium from scrapped autocatalysts. Total supply jumped by 18% to 7.62 million oz and for the second year in a row the palladium market was in surplus by over 1 million oz.
The palladium price, supported by hedge fund buying, hit a high of $333 in April 2004 but fell to $178 in December. With production and stocks of palladium more than adequate to meet demand, the prospect of a sustained rally in the price seems remote unless there is further substantial speculative buying. JM expects a trading range for palladium of $160 to $230 per oz for the coming six months.
Platinum 2005 is Johnson Matthey’s latest market survey of platinum group metals supply and demand. This report, widely regarded as the world’s principal source of information on platinum group metals, is free of charge. It is available in printed form on request from Johnson Matthey at the address below or can be viewed and downloaded at: www.platinum.matthey.com/publications/publications.html
Johnson Matthey is the world’s leading authority on the production, supply and use of platinum and the other metals of the platinum group. The company’s main activities include the manufacture of autocatalysts, platinum process catalysts and speciality chemicals and the refining, fabrication and marketing of platinum group metals.
Source: Platinum Today