Not enough platinum to meet demand

Demand for platinum in 1987 exceeded 3 million oz for the first time, international metals company Johnson Matthey reports in its publication Platinum 1988. On the other hand, there was a shortfall in supply of 220,000 oz last year, marking the third consecutive year in which supplies were insufficient to meet demand, the company writes in its annual review of the platinum group metals industry.

The situation is not expected to improve. “We believe platinum supplies will continue to fall short of demand not only in 1988 but possibly in the following two years also,” writes the company.

Average price of the metal in 1987 was $556(US) per oz, up $94 from the year before. Johnson Matthey foresees the price fluctuating within a $50 range on either side of $500 for the rest of this year, “but with a fair chance it will dwell longer above the $500 mark than below it.”

Price of the precious metal recently went on a tear, topping $600, the reasons for the run-up in part having to do with a strong demand by Japanese buyers and fears of rising inflation in the U.S. Earlier this year, platinum was selling for as low as $469.30. Japanese demand

Helping the demand for the metal in 1987 jump 15% over 1986, to 3.32 million oz, was a 63% increase in Japanese demand to 1.65 million oz, Johnson Matthey says.

About 900,000 oz of the Japanese total was taken up by the jewelry sector, whose requirements increased by 21% from 1986 and should grow further this year.

Platinum consumption also increased in western Europe, particularly for use in autocatalysts. “Consumption of platinum by west-European automakers in 1987 greatly exceeded our expectations. We now estimate it grew by 85% over 1986 and amounted to 225,000 oz,” Johnson Matthey says, adding that it foresees continued steady growth of demand this year.

Overall, west-European consumption grew by 20% to 560,000 oz.

Japanese investment in kilo and half-kilo platinum bars rose dramatically to 275,000 oz last year. However, investment in products weighing 10 oz or less showed a more mixed pattern. Demand for such products worldwide totalled 215,000 oz, down 52% from 1986. The decline occurred mainly in the U.S. market, but demand in Japan almost doubled. Primary supplies up

Primary supplies were also higher in 1987, but not sufficient to cover the increased demand. Overall supplies to the non-Communist world rose by 270,000 oz to a record 3.1 million oz. South African shipments increased by 170,000 oz, Canadian supplies fell, and an additional 110,000 oz of platinum were sold by the U.S.S.R.

South Africa mines about 80% of the world’s platinum, and the U.S.S.R. about 15%. In Canada, platinum group metals are mined as byproducts. North America’s only producing platinum mine is the Stillwater project in Montana.

Johnson Matthey does not foresee a potential supply increase leading to a surplus of the precious metal. “Clearly, the present picture will change but it seems to us that assumptions of oversupply in the 1990s are premature,” writes the company.

In 1987, autocatalysts accounted for 35% of the demand for platinum in the non-Communist world, jewelry 30%, investments 15%, chemical 6%, electrical 5% and glass, petroleum and other uses the remaining 9%. Rallies short-lived

While platinum prices rose sharply recently, gold experienced only a small rally, jumping to about $465 per oz. Price of the yellow metal then retreated to the $450 range. The price of silver also moved up, clearing the $7-per-oz hurdle.

Other information in the Johnson Matthey publication includes:

— Trading in platinum futures on the Tokyo Commodity Exchange for Industry was almost one-third higher last year compared with 1986, while on the New York Mercantile Exchange, platinum trading volumes last year decreased by 16%.

— Vigorous demand from the electronics sectors in Japan and the U.S. pushed palladium demand to a record 3.25 million oz, up 11% from 1986. Overall, supplies fell short of demand by 120,000 oz. Palladium averaged $132 per oz last year, $15 above 1986.

— Demand for high-priced rhodium exceeded 300,000 oz for the first time; rhodium is in hot demand for use in three-way autocatalysts. The U.S.S.R. increased its exports of the metal last year. The Impala producer price for rhodium is currently $1,275 per oz.

— South Africa’s three platinum producers have announced expansion programs, and plans for four new mines (one of which could be in production by 1991 or 1992) in that country have also been made public.

— Demand for ruthenium, used mainly in the electronics and electrochemcial industries, dropped by 31% last year. Demand for iridium, also used in the electrochemicals sector, was static. The market for the sixth platinum group metal, osmium, is small and is expected to remain so.