PGMs bullish in May

The investor and dealer selling that had undermined the platinum price in late April eased in early May, and physical demand provided a solid floor around US$520 per oz.

The positive fundamentals for platinum, highlighted by Johnson Matthey’s Platinum 2002 report (T.N.M., May 27-June 2/02), provided the impetus for renewed buying, the generally bullish sentiment being backed up by the continuing rally in gold. However, the resulting rise stalled short of US$550 per oz., and platinum consolidated its position in a narrow range of US$537-548 per oz.

The combination of physical sales (largely attributed to Russia) and speculative selling by funds extended from late April into early May. With many Chinese and other Asian buyers absent, owing to national holidays, the downward pressure met little resistance on May 1, and the platinum price fell to a fix of US$520 per oz. from US$536. Physical buying at this level halted the slide, and as fund selling tailed off, a modest recovery began. Platinum regained to US$530 per oz. on May 8, but in quiet, thin trading eased back to US$522 per oz. two days later.

Johnson Matthey’s Platinum 2002 report, released on May 13, was widely interpreted as being bullish on platinum. The positive fundamentals underlying demand fed into market sentiment, and with lower volumes of metal offered on the London fixings, the price started to climb. Platinum rose to US$525 per oz. on the morning of May 13 and had made its way to US$539 by May 16, helped by the continuing strength of gold.

Investor purchasing on both the Tokyo Commodity Exchange (TOCOM) and New York Mercantile Exchange (NYMEX), driven in part by technical factors, marked the start of the following week. The bullish tone was supported by comments from Barry Davidson, executive chairman of Anglo Platinum, who said the company expected prices to remain firm in light of continuing strong demand from the auto sector. Physical demand also remained steady, pushing the price to US$543 on May 20 and to US$546 a day later.

The move above US$545 and a failure to breach US$550 triggered a degree of profit-taking, and the price eased back to US$543 on May 22. The remainder of the month then saw platinum consolidate in a narrow range of US$537-548. Contract volumes on the TOCOM were relatively low, but the metal was well-supported by physical purchasing on the London fixings and gained a degree of buoyancy from the rise of gold to more than US$325 per oz.

After several quiet sessions, platinum ended May fixed at US$548 per oz.

In related news, the U.S. Defense National Stockpile Center (DNSC) announced that it would have the authority to sell an additional 45,000 oz. platinum and 6,000 oz. iridium under revisions to the Annual Materials Plan. The DNSC sold 61,000 oz. for roughly US$22.5 million in April.

Also, Japan-based Sumitomo Metal & Mining Co. said it planned to spend 4 billion yen refurbishing its precious metals refineries. The changes will enable the company to speed up the recovery of gold by 85%, as well as boost recoveries of iridium and platinum group metals.

Meanwhile, Russia’s Noril’sk announced it had reached an agreement with the state platinum-group-metal marketing agency Almazjuvelirexport that would enable the company to sell off its annual precious metals quota via its London-based trading subsidiary Norimet.

— The preceding is an excerpt from a news bulletin published by London-based Johnson Matthey.