Platinum market steady

Platinum demand will grow by less than 1% and the platinum market will be close to balanced in 2004, according to Johnson Matthey’s Platinum 2004 Interim Review.

Increased demand for platinum from the automobile and glass industries will be largely offset by weaker purchases of platinum by jewelry manufacturers, bringing total demand this year to 6.5 million oz., a rise of about 50,000 oz. from 2003.

Auto demand is up because of the strong European market for diesel engine cars, which use platinum autocatalysts, and because of tighter emissions regulations in Europe and Japan. The expansion of liquid crystal display (LCD) glass manufacturing in Asia has boosted demand for platinum in the industrial sector, but the high price of platinum has affected Chinese jewelry demand for the second year running, with manufacturers reducing stocks and diverting production into other white metals.

Although lower Russian sales of platinum are expected in 2004, higher output from Canada and South Africa will more than compensate, and total supply is forecast at 6.4 million oz., up 230,000 oz. over 2003. This higher output will significantly narrow the gap between supply and demand, leaving a projected market deficit of just 40,000 oz.

The platinum price averaged US$845 per oz. in the first 10 months of 2004 (up 25% year over year), supported by hedge-fund and other investor buying and by the firmness of overall demand. In 2005, Johnson Matthey predicts, supplies of platinum will expand faster than demand, and the market will move into surplus for the first time in six years. The surplus will lead to a slightly softer platinum price, in the range US$760-880 per oz., for the next six months.

The palladium market is set for another 1-million-oz. surplus in 2004, which has put a cap on the price despite a recovery in demand and strong speculative buying.

Demand for palladium is forecast to rise by 730,000 oz., to 6.1 million oz. Purchases by the auto industry are projected to grow in 2004 as U.S. auto companies use less metal from inventory and as global light vehicle production rises. But the largest factor in the increase will be the introduction of palladium jewelry in China.

Purchases of palladium in the first quarter of 2004 climbed as jewelry wholesalers and retailers established stocks. Supplies of palladium in 2004 are projected to rise by 700,000 oz., to 7.2 million oz, with a large increase in Russian metal coming on to the market as Stillwater has begun to sell the stock of palladium it acquired from Norilsk Nickel in 2003. The market surplus, which is forecast to reach 1.02 million oz. this year, has weighed on the price of palladium. Apart from a short-lived and fund driven rally to US$333 per oz. in April, it has been largely confined below US$240 per oz.