Johnson Matthey predicting ’86 platinum supply shortfall

Johnson Matthey, a British- based precious metals refiner and manufacturer, expects the supply of platinum to fall 60,000 oz short of demand in 1986, according to its 1986 interim review of the industry.

It will be the second consecutive year of a supply deficit for platinum. Western world supply in 1986 is projected at 2,810,000 oz compared with demand of 2,870,000 oz, a figure which includes 50,000 oz of western exports to communist economy countries. In 1985 Johnson Matthey reported a 100,000-oz shortfall of platinum with estimated Western World demand of 2,840,000 oz.

Johnson Matthey expects supplies of platinum from South Africa will be slightly higher than last year with the rising market price having encouraged the two major producers to maximize output from existing capacity.

Soviet shipments to the West also appear to have been running at higher levels than in 1985. Supply, therefore, could be close to the previous highest level of 2,820,000 attained in 1980.

Against a background of over-all increased demand and speculation stemming from the South African political situation, market conditions are very unsettled and the future direction of prices is not clear, says Johnson Matthey.

“With the market in its present mood, however, there seems little prospect of a quick return for platinum to its (lower) price levels of 1985.”

The refiner says purchases of platinum this year by the autocatalyst and investment sectors are already evident, however, boosting demand.

A key factor in the autocatalyst market, the largest single source of demand for platinum, has been the rapid growth of demand in western Europe — nearly a fourfold increase between 1984 and 1986 to a projected 120,000 oz this year.

Chiefly responsible for this increase in demand are the leading West German car makers who have a strong commitment to autocatalysts. There has been a surge in sales of catalyst-fitted cars in West Germany and Switzerland.

Private investors in many countries have been big buyers of small platinum bars (defined as denominations of 10 oz or less) and coins with demand to date indicating that over 400,000 oz — almost equivalent to the combined total for the two previous years — will be absorbed by this sector of the market in 1986 as a whole.

Investors in the U.S. are responsible for nearly two-thirds of the demand in this sector and their purchases account for 90% of growth in the sector.

Johnson Matthey’s review is available free from the company’s New York office.