Platinum in high demand

Demand for platinum is forecast to climb by 2.9% to 6.4 million oz. in 2002, according to an interim review of platinum-group-metal markets published by London-based Johnson Matthey.

Chinese purchases of platinum for jewelry will rise strongly for the seventh straight year, the review predicts. It adds that although the use of platinum in catalytic converters continues to grow, purchases of the metal by the auto industry have levelled, owing to the use of stockpiles.

Demand from industrial users this year are expected to be largely similar what was experienced in 2001.

Supplies of platinum are expected to grow only marginally to 5.9 million oz., and higher production from South Africa will be offset by a large drop in Russian sales. Consequently, the deficit in the platinum market is expected to widen to 490,000 oz. This deficit has been evident in tightening physical liquidity and the strengthening platinum price. During the first nine months of 2002, substantial volumes of metal were withdrawn from market stocks held in Switzerland, the purpose being to help satisfy demand.

Demand for platinum in autocatalysts is forecast to remain stable at 2.5 million oz. in 2002, despite projected growth in use of the metal in this sector. This paradox is accounted for by the significant use of inventories of platinum by some U.S. auto manufacturers, who had built up stocks over the previous two years.

In all the major vehicle manufacturing regions, the shift from palladium towards greater use of platinum in autocatalyst systems has noticeably increased consumption of the latter metal in 2002.

In Europe, platinum demand has been boosted by the continued growth in sales of diesel cars (which only utilize platinum-based autocatalysts) at the expense of gasoline vehicles. Platinum consumption in 2002 will also increase as auto companies launch new models to meet tighter emissions standards.

After falling in 2001, jewelry demand for platinum is expected to rebound by 230,000 oz. to 2.8 million oz. in 2002. Chinese demand will again experience double-digit growth and is forecast to reach 1.5 million oz. In contrast, Japanese retail sales of platinum jewelry declined between January and September.

Demand for platinum in industrial applications is forecast to be stable at 1.5 million oz. New chemical manufacturing capacity in the Middle East and Asia will generate a modest increase in demand for platinum-based process catalysts, but glass industry demand for platinum will slip as expansions are proceeding at a lower rate than in 2001.

Electrical demand is also expected to be flat. That’s because the widespread use of hard disks containing platinum in non-computing applications will be offset by weak computer sales.

Purchases of platinum investment products were relatively strong in the first quarter of the year, but sales have fallen back as the price has risen. Overall, investment demand, at 90,000 oz., is expected to be the same as 2001.

Supplies are forecast to reach 5.9 million oz. this year, a marginal increase of 30,000 oz. over 2001. New projects and expansions of existing operations in South Africa will deliver substantially higher volumes of the metal in 2002. Russian sales, on the other hand, are likely to drop close to the level of production.

Sales of platinum from South Africa are forecast to reach a new high of 4.4 million oz. in 2002. The largest increase in output will come from Anglo Platinum, though production from all the established producers will grow.

Anglo Platinum plans to supply 2.25 million oz. platinum this year, an increase of approximately 140,000 oz. Production will be lower than the company’s initial 2002 forecast, owing to delays to the ramp-up of production at the Bafokeng Rasimone platinum mine.

Johnson Matthey predicts that supplies from Russia in 2002 will fall to 950,000 oz., significantly down from 2001, when 1.3 million oz. of the metal were sold. Central government stocks of platinum are now relatively low, so shipments are expected to be close to the level of production at Noril’sk Nickel and the alluvial operations in far-eastern Russia. Although Noril’sk is willing to sign contracts for most of its palladium production, the company says it will continue to sell platinum on the spot market.

Supplies of platinum from North America are forecast to rise by 15,000 oz. in 2002, primarily because of increasing PGM output from Stillwater Mining in Montana.

Output is also increasing in Zimbabwe: Zimplats will get a maiden contribution from its Ngezi mine this year, while an expansion program at Mimosa is under way.

— The preceding is from Johnson Matthey’s Platinum 2002: Interim Review of PGM Markets.