Survey says platinum could reach surplus

The amount of newly refined platinum, palladium and rhodium entering the market is expected to rise sharply this year, owing mostly to expanded production at many South African operations.

Meanwhile, the demand for items made with platinum group metals remains largely unfazed by the dramatic run-up in prices in 2000 and early 2001. In fact, demand for all PGMs is projected to rise this year, with catalytic converters in automobiles as the main source of growth.

These are among the key findings contained in a survey by CPM Group of New York, N.Y. The report also points out that platinum prices averaged $535.26 in 2000, up 43.5% from the previous year, and that in the first six months of 2001, prices averaged $595.31, or 22% higher than in the corresponding period of 2000.

Total supply is projected to rise 15.4% this year to 5,613,000 oz., owing to significantly higher mine production, including a 15.6% increase in South African output. Secondary supply also is rising sharply, due in part to higher prices.

Fabrication demand could expand 2.5% to 5.2 million, and although auto use continues to grow, jewelry demand may post its fourth consecutive year of decline.

This year, the platinum market is expected to move into a surplus of 396,000 oz., compared with last year’s deficit of 225,000 oz. The shift reflects trends in mine production and Russian exports.

Palladium prices reached record highs in 2000, averaging $686.65, up 90.9% from 1999. From January to June 2001, prices averaged $791.11, 32.6% higher than in the comparble period last year. Prices settled at an all-time high of $1,082.80 on Feb. 5, 2001.

In 2001, total supply is projected to expand 8.7% to 6,389,000 oz., reflecting higher production in South Africa and Canada.

Industrial demand may reverse a two-year decline and post a 3.5% increase to 6,975,000 oz. this year, according to the survey. Automotive demand is rising sharply, while electronics usage appears to be remaining the same. The net deficit in the palladium market is expected to contract to 586,000 oz. this year, compared with 866,000 oz. in 2000.

Rhodium prices remained strong in the second half of 2000 and in early 2001. Dealer prices averaged $1,833 in 2000, up 112.5% compared with 1999. In the first five months of this year, prices rose an additional 15.2% over the similar 2000 period to average $1,905.

Fabrication demand growth could taper to a 1.3% increase, lifting demand to 543,143 oz. in 2001.

A small surplus may emerge in the rhodium market this year, following three consecutive years of current account shortfalls. The surplus may total 10,554 oz., compared with last year’s deficit of 42,689 oz.