The Northern Miner Volume 85 Number 46 January 10-16, 2000
COMMENTARY -- Platinum demand soars
In 1999, demand for platinum was expected to reach a new record of 5.6 million oz., according to a report by a British-based metals
analyst. Use of the metal in jewelry is believed to have increased around the world, with demand from China alone soaring by an
estimated 230,000 oz. Industrial demand also grew, but sales of investment products are expected to have declined by more than
one-third.
According to an interim review of world platinum supply and demand by Johnson Matthey, supplies from South Africa rose by a projected
140,000 oz. in 1999 to 3.8 million oz., reflecting the completion of several expansion projects. Russian supplies were severely hampered by
budgetary legislation passed in late 1998, and greater supply from Zimbabwe will be offset by a drop in North American production.
As demand was strong and supplies limited, the analyst predicts a deficit of 530,000 oz. for 1999.
After months of stability, the price of the metal began to climb in September, driven by short covering in all precious metals following the
announcement that most European central banks were planning to curtail their sales of gold reserves.
Until about mid-2000, the price of platinum is forecast to trade between $370 and $440, though the absence of Russian supply (due to
legislative tangles) could boost the price beyond $440.
On the demand side, South African miners increased production last year through expansion projects, with still more expected to come
on-stream over the next few years. Amplats is leading the way, with output from the new Bafokeng Rasimone mine adding to announced
expansions at PPRust, Amandelbult and Lebowa. The second-largest producer in South Africa, Impala Platinum, is developing a series of
decline shafts from its existing underground workings; the shafts should enable the company to lift its annual platinum production to 1.1 million
oz.
The Russian supply situation was unclear, with approval of export quotas and licences severely delayed. A clause contained in a bill concerning
the Russian budget passed in late 1998 restricted the export of platinum group metals to specially authorized "state organs." However, none of
the bodies currently involved in PGM trade in Russia met such legal conditions.
Platinum sales from other Western mines increased by a projected 20,000 oz., to 440,000 oz. This increase is smaller than originally
anticipated. Output in the U.S. was affected by mining problems at the Stillwater mine in Montana, while, in Zimbabwe, the Hartley Platinum mine
was closed.
Consumption of platinum by automakers is expected to have slipped for the third straight year, by 70,000 oz. to 1.7 million oz., despite high car
sales in the U.S. and Europe. Manufacturers in both regions are increasingly substituting palladium for platinum in catalysts. In Europe, diesel
cars, which are fitted with platinum catalysts, are gaining in popularity and now account for 26% of new car sales.
Demand for platinum in jewelry is expected to have increased significantly in 1999 to 2.7 million oz., compared with 2.4 million oz. in 1998. The
largest increase has been in China, where demand surged during the first eight months of the year. In Japan, demand is expected to rise by
30,000 oz. to 1.3 million oz. -- the first increase in four years. Platinum demand for jewelry in North America will rise by 20% this year to reach
300,000 oz.
Industrial uses of platinum continue to increase, with demand in 1999 pegged at 1.3 million oz., up by 90,000 oz.
The most rapidly growing application is the use of platinum in computer hard drives. The market for hard disks is anticipated to have grown 10%
in 1999. The past year saw an increase in demand from the chemical industry, particularly for platinum catalysts used in the production of
silicones, and for the production of high-purity benzene for conversion to nylon. The auto sector has seen an increase in demand for non-catalyst
applications, such as spark plugs and sensors.
Investment demand for platinum fell sharply in 1999, by an estimated 115,000 oz. to 200,000 oz. In the U.S., sales of platinum Eagle coins
dropped 41% over the first nine months, compared with the corresponding period in 1998. Analysts predicted that Y2K computer jitters would
drive conversion of cash assets to precious metals, but only sales of gold and silver Eagle coins were strong. Sales of similar platinum products
outside the U.S. -- particularly in Japan, where the metal lost market share to gold -- were also poor in 1999.
|
