Outlook for platinum tied to autocatalysts

In 1989 the world platinum market paused for breath as demand for the white metal came more closely in balance with supply when compared with 1988. “Total demand for platinum in the Western World in 1989 was 3.4 million oz., about 5% lower than in 1988, but still the second highest yearly total on record,” says precious metals dealer Johnson Matthey.

In the recently published Platinum 1990, Johnson Matthey says the strong demand for platinum is being driven by buoyant conditions in two of the metal’s largest applications — namely jewelry (38%) and autocatalysts (37%).

The outlook for this year calls for weaker demand in North America, as vehicle sales enter a slump and lower auto production is expected.

Only a marginal amount of platinum came on to the market from new mines, the study notes. In North America, the auto industry increased its purchases despite a downturn in production of cars and light trucks. Investment demand slackened, although sales of small bars improved slightly.

Autocatalyst demand last year was estimated at 1.45 million oz., a 9% rise from 1988, with the main growth taking place in Western Europe. Recovery from spent autocatalysts increased by 15,000 oz. to 175,000 oz.

After a record year in 1988 for jewelry demand in Japan, total jewelry consumption worldwide in 1989 reached 1.3 million oz. Demand from other industrial sectors such as electrical and chemical continued to firm.

Meanwhile, demand from the investment sector declined to less than 5% of the total market, down 17% from the level reached in 1988. “The investment sector consumed only 160,000 oz.,” the report says. Demand excluding investment, however, rose by 275,000 oz.

“If the loss of confidence in equities spreads, there could be a reduction in the high levels of personal spending which have supported the production of jewelry,” the report says.

On the supply side, a new peak of 3.37 million oz. was reached last year. Three new South African mines began production in 1989, but their output was modest. In the longer term, Platinum 1990 notes that the South African mining houses have been expanding their production plans based on anticipated future growth in demand from the auto sector. If fully realized, the increased production could add more than one million ounces of capacity by 1990.

Exploration continues around the Bushveld Complex, host to the Merensky reef, which is the source of more than 80% of all the platinum mined in South Africa.

As well, platinum sales in 1989 from the USSR which, at 550,000 oz., were the highest of the decade. “The marketing strategy of the USSR is, as ever, a conundrum,” says the review. “Last year’s increased supplies almost certainly arose from a need to generate hard currency.”

As far as price is concerned, Johnson Matthey sees no reason to deviate from its earlier forecast which predicted prices would fluctuate between US$470 and US$520 an ounce.