Auto sector drives platinum demand

Demand and prices for platinum will remain firm, but the outlook for palladium is less positive, according to Platinum 2002, an annual report published by London-based Johnson Matthey.

Demand for platinum reached a record 6.1 million oz. in 2001, driven by a one-third increase in demand within the auto industry for catalytic converters. Increased industrial use of platinum in the glass, petroleum and dental sectors was partly offset by a drop in use for computer disks.

Purchases by jewelers in Japan and the U.S. declined sharply, while in China they reached a new high. Expansion at South African mines sent an extra 300,000 oz. to market, while Russian sales increased by 200,000 oz.

The price of platinum fell to US$406 in October 2001 from US$645 in January as the world economy deteriorated. Better economic prospects and firmer consumer demand have already led to a recovery. Johnson Matthey expects demand growth in 2002 to absorb increased mine supplies, and predicts a price range of US$480-580 for platinum in the next six months.

Demand for palladium in 2001 was down 25% at 6.7 million oz. A slump in the production of electronic components and high metal stocks caused demand for palladium in the electronics sector to fall by more than two-thirds. Auto and dental industries also reduced inventories and replaced palladium with platinum. Supplies declined by 6% to 7.3 million oz., with Russian sales being cut back sharply in the second half. Nevertheless, supply exceeded demand by 590,000 oz.

The slump in palladium demand contributed to a price collapse to $315 per oz. in October 2001 from $1,094 in January. Recently, the price has stabilized as a result of sluggish demand and limited Russian supply. With consumers likely to reduce their use of palladium in 2002, the price is expected to remain relatively weak, ranging from $250 to $400 for the rest of the year.

Demand

Autocatalyst: