Not Taking a Shine to Platinum Metals Yet
thestreet.com
By Howard Simons
Special to TheStreet.com
10/09/2001 03:17 PM EDT
Off in another corner of the matrix are the platinum group metals. These are far scarcer than gold and are of such great economic value that approximately 20% of the goods in the modern economy have one of the platinum group catalysts involved somewhere in their manufacture.
The precious metals have been emitting inflationary warnings, and the base industrial metals have been stuck in recessionary gear. What can we learn from the platinum group, which includes platinum, palladium, osmium, iridium, ruthenium and rhodium
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From Russia With Shove
Just like crude oil is found in such desolate locales as the deserts of Arabia, the jungles of Indonesia, the trackless wastes of north Alaska and in Los Angeles, the platinum group is found in such garden spots as South Africa, western Australia and Canada. The world's incremental supplies have come from mines in northern Siberia.
A series of production disruptions in Russia -- our newfound allies in the fight against global terrorism mysteriously get victimized by disruptions when whatever they produce enters a bull market -- led to some Nasdaq-like price jumps in the metals' prices between late 1999 and early 2001. That bubble has burst as all commodity-price bubbles do. Higher prices stimulate new production and lead to demand conservation.
The severity of this price collapse reflects, by definition, a supply/demand imbalance. Supply remains strong as exporters strapped for hard currency maintain production even as prices fall. Demand has weakened as a function of the downturn in global manufacturing. Are there any signals from the equities of platinum miners that this cycle is about to break?
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The implication here is the same one reached last week from the base metals prices: If an economic recovery, or at least a manufacturing recovery, is imminent, it's news to metals buyers. |
