Platinum shortfall

Vancouver — Global demand for platinum is poised to touch a record level of 6.93 million oz. this year, up 195,000 oz. or 2.9% from 2006, says refiner and PGM marketing group Johnson Matthey in its recent Platinum 2007 Interim Review.

The study also forecasts a modest drop in production of roughly 195,000 oz. platinum — pegging this year’s supply at about 6.66 million oz. for a deficit of 265,000 oz.

The rise in demand is attributed to growing use of the metal in the auto-catalyst sector, especially in diesel vehicle emission control. About 4.24 million oz. platinum will be used in catalyst application over the year — representing about 61% of total demand.

The industry will absorb about 1.6 million oz. platinum in 2007, down about 1.5% from the previous year.

The report cites supply interruptions from South Africa as the main reason for this year’s shortfall. Sales from the country are projected to be down about 70,000 oz. to 5.22 million oz. due to safety-related shutdowns and industrial action at some of Anglo Platinum’s (ANP-L, ANANP-J) operations, plus the closure of a Lonmin (LMI-L, LOLMI-J) smelter for a furnace rebuild.

Russian output of the white metal is expected to be down about 70,000 oz. in 2007 — forecast at 820,000 oz.

The spot price for platinum recently hit a record high of US$1,476 per oz. Outlook remains bullish, with some signs that the price of the white metal could continue to rise, driven by the strong gold market and the tumbling U.S. dollar.

Citing strong buying from Asia on any price drops, Johnson Matthey predicts a support level for platinum at US$1,350 per oz,. with a potential rally to the US$1,575-level over the next six months.

Palladium is also likely to see a boost in demand for 2007 — inching up 135,000 oz. to 6.6 million oz. — but there will continue to be a strong surplus of the metal, with supply of 8.3 million oz. forecast for the year.

A growing amount of palladium is being consumed in the auto-catalyst sector — driven by a surging Asian car industry. Wide price differences between palladium and platinum have prompted increased usage of the former.

With palladium posting a recent spot price around US$355 per oz., Johnson Matthey sees fund investors likely stepping in to form a base level around US$320 per oz. over the next six months — possibly pushing the metal’s price up to US$420 per oz.