Platinum 2010 Interim Review

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Nov 16, 2010, 12:41 ET

    LONDON, November 16, 2010 /PRNewswire-FirstCall/ --
    - PLATINUM MARKET TO BE IN SMALL SURPLUS IN 2010
    - PALLADIUM MARKET TO BE CLOSE TO BALANCE
    PLATINUM MARKET FORECAST TO BE IN SURPLUS BY 290,000 OUNCES IN 2010

Gross platinum demand is forecast to rise by 11 per cent to 7.56 million ounces in 2010, according to Johnson Matthey in "PLATINUM 2010 INTERIM REVIEW", released today. Recycling of platinum in the autocatalyst, jewellery and electrical sectors is expected to increase by 31 per cent to 1.84 million ounces. Supplies of platinum from current mining operations are set to remain almost flat at 6.01 million ounces. As a result, net platinum demand is expected to increase by 6 per cent to 5.72 million ounces, putting the market in a small annual surplus of 290,000 ounces.

SUPPLIES OF PLATINUM ARE EXPECTED TO REMAIN ALMOST FLAT IN 2010

South African production of platinum is forecast to fall by 1 per cent to 4.59 million ounces as a series of safety stoppages and supply interruptions affect output. Supplies from North America are expected to fall by 19 per cent to 210,000 ounces mainly due to strikes. Supplies in Russia are expected to rise to 810,000 ounces due to improved productivity and processing of surface materials. Expansion at mines in Zimbabwe is set to increase the country's output to 280,000 ounces.

AUTOCATALYST PLATINUM DEMAND TO RISE AS DIESEL VEHICLE MARKET RECOVERS

Global demand for platinum in autocatalysts is expected to strengthen by 37 per cent to 2.99 million ounces as vehicle production recovers from a dismal 2009. Gross demand for platinum in European autocatalysts is expected to increase by 46 per cent to 1.42 million ounces in an improved economic and credit environment. The ending of various national car scrappage incentives in Europe and a return to fleet vehicle buying is expected to favour purchases of diesel vehicles, and therefore platinum demand for exhaust after treatment. Recovery of platinum from spent autocatalysts is expected to rise by 32 per cent to 1.1 million ounces stimulated by higher platinum prices and the returns from car scrappage schemes.

INDUSTRIAL DEMAND TO GROW AS ECONOMIC RECOVERY GAINS MOMENTUM

Improved economic conditions in 2010 are expected to stimulate purchases of platinum across a range of industrial sectors, lifting gross industrial demand to 1.72 million ounces. Platinum demand in the glass industry is expected to recover strongly to 365,000 ounces as consumer purchases of LCD TVs and monitors drive the building of new manufacturing lines for LCD glass in Asia. Demand for platinum in the electronics sector is also forecast to rise, increasing to 225,000 ounces. Higher rates of factory utilisation, boosted by increased demand for consumer products, are anticipated to lift demand for process catalyst, bringing chemical demand for platinum to 450,000 ounces.

SOFTER DEMAND FOR PLATINUM JEWELLERY AS PRICES REMAIN HIGH

Gross global demand for platinum in the jewellery sector is forecast to drop by 14 per cent in 2010 to 2.42 million ounces as retailers and consumers reduce purchasing in response to higher prices in 2010. Demand for platinum jewellery in China is expected to fall by 21 per cent to 1.65 million ounces in 2010 as some consumers defer purchases. Higher platinum prices are anticipated to lift recycling levels by 30 per cent to 735,000 ounces.

INVESTMENT DEMAND FOR PLATINUM SET TO DECLINE

Despite the popularity of platinum exchange traded funds (ETFs), physical investment demand for platinum is forecast to fall by 34 per cent to 435,000 ounces in 2010. Higher prices are expected to reduce demand for platinum coins and bars, and encourage redemption of ETF positions.

PLATINUM EXPECTED TO TRADE ON AVERAGE AT $1,750 IN THE NEXT SIX MONTHS

With a recovering global economy driving autocatalyst and industrial demand, and some growth in platinum production, Johnson Matthey expects the platinum market to be close to balance in 2011. However, uncertainties remain over the impact of sovereign debt, tighter credit and national austerity measures on economic growth. The recent performance of platinum suggests that its price is being steered by speculative futures positions, ETF holdings and external influences such as the US Dollar and the gold price, rather than supply-demand fundamentals. Johnson Matthey forecasts that platinum will trade between $1,550 and $1,900 per ounce and will average $1,750 per ounce during the next six months.

PALLADIUM

PALLADIUM MARKET TO BE CLOSE TO BALANCE IN 2010

The palladium market is forecast to be in a very small annual surplus of 45,000 ounces in 2010. Gross demand for palladium is set to rise by 15 per cent to 8.94 million ounces in 2010 on the back of strong automotive and industrial demand. Recovery of palladium from scrapped autocatalysts, jewellery and electronics will increase by 29 per cent to 1.85 million ounces. Net demand is therefore forecast to increase by 12 per cent to 7.10 million ounces.

SUPPLIES EXPECTED TO REMAIN ALMOST FLAT AT 7.14 MILLION OUNCES

Supplies of palladium are set to be almost flat at 7.14 million ounces, an increase of just 40,000 ounces compared with last year. Production from current South African, Russian and Zimbabwean mining operations is expected to rise slightly in 2010. Sales of metal from Russian state stocks are estimated to contribute around 1 million ounces to supplies this year. North American supplies are expected to drop by 26 per cent to 560,000 ounces, mostly offsetting the growth in supplies in other regions.

AUTOMOTIVE PALLADIUM DEMAND SET TO INCREASE BY 27 PER CENT

Demand for palladium in autocatalysts is forecast to increase by 27 per cent to 5.15 million ounces in 2010. Recovery of light duty vehicle production in all regions, and particularly rapid growth in production of gasoline vehicles in China, is expected to drive this increase in demand. Recovery of palladium from spent autocatalysts is forecast to increase by 37 per cent to 1.32 million ounces as a higher palladium price and car scrappage schemes stimulate recycling.

INDUSTRIAL PALLADIUM DEMAND TO BENEFIT FROM RECOVERY IN ELECTRICAL SECTOR

Gross demand for palladium in industrial applications is expected to rise by 8 per cent to 2.49 million ounces, returning close to its 2008 level. Increased consumer purchasing of electrical items is set to boost demand for palladium in multi-layer ceramic capacitors, ubiquitous in consumer electronics. Recycling of palladium from scrapped electrical devices is forecast to increase by 11 per cent driven mainly by legislation on electronic waste. Chemical demand for palladium is expected to benefit from the wider recovery in the manufacturing sector in 2010.

PALLADIUM INVESTMENT DEMAND TO REMAIN STRONG, JEWELLERY DEMAND TO FALL

Identifiable physical investment demand for palladium, particularly in exchange traded funds, is expected to rise to 670,000 ounces in 2010. Redemptions in the more mature funds are anticipated to limit the increase in new demand. Demand for palladium jewellery is forecast to fall by 19 per cent in 2010 to 630,000 ounces, with most of the decline due to weaker trade interest in China.

PALLADIUM PRICE TO BE SUPPORTED BY FUNDAMENTALS AND INVESTMENT

With steadily increasing automotive and industrial demand, the outlook for palladium is mainly positive. However, concerns around sovereign debt and austerity measures in developed countries could temper economic growth. China, the second biggest market for palladium in 2010, could also significantly affect the supply-demand balance if economic growth in that country were to slow. If no shipments of Russian state stocks of palladium take place in 2011, the palladium market will be in substantial deficit. With these tight supply-demand fundamantals, investors continue to see palladium as relatively undervalued. Continuing speculative investment interest could move the price substantially, and Johnson Matthey forecasts that the price of palladium will average $710 per ounce in the next six months, trading as high as $850 in the period, with the price unlikely to fall below $550.

Note: "PLATINUM 2010 Interim Review" includes gross demand and recycling data for the auto, electrical and jewellery sectors, from which net demand can be derived.

Platinum 2010 is Johnson Matthey's free survey of platinum group metals supply and demand. It can be downloaded as an electronic file or can be ordered in printed form at http://www.platinum.matthey.com/publications/pgmreview.html

Johnson Matthey is the world's leading authority on the production, supply and use of platinum and the other metals of the platinum group. The company's main activities include the manufacture of autocatalysts, process catalysts and speciality chemicals and the refining, fabrication and marketing of platinum group metals.

    For further information contact:
    Mark Bedford +44-(0)7967-278231
    Neill Swan +44-(0)7967-278014
    Jonathan Butler +44-(0)7967-278024
    Jeremy Coombes +44-(0)7967-278012

SOURCE Johnson Matthey