Thanks to Dunning21 for this on Stockhouse. stockhouse.com.
Lets discuss this here:
Fords >$1-bn loss on platinum metals
By: Tim Wood
Posted: 2002/01/16 Wed 11:58 EST | © Miningweb 1997-2002
PRINCETON, NJ -- It seems Ford is a lot better at making cars than trading in metals after taking a $1 billion loss on its platinum metals horde. The company's precious metals loss amounts to a quarter of the total after tax write-down being taken after a dismal year.
The Associated Press reports that Ford COO Nick Scheele says the company bought palladium, used in its catalytic converters to reduce engine emissions, for around $1,500 an ounce only to see it drop to $400 an ounce less than a year later. He was quoted speaking at the Automotive News World Congress in Dearborn
Middlemen who sold Ford its stash pocketed the best profit in the entire platinum metals value chain since the metal peaked at a spot price of $1,100 early last year. "Frankly, we saw palladium spiking in price, we bought palladium, and at the same time, our research labs did a magnificent job in
reducing our dependence on palladium."
The size of the loss suggests that Ford bought at least a million ounces of platinum group metals and most likely considerably more. Given that producers supply less than 8 million new ounces of palladium to market each
year, it's easy to see how such competitive bidding between the global auto makers drove prices up so far, so fast. But had Ford paid the going rate its pain might be quite different.
The indicative stockpile will weigh on pgm producers valuations for at least the next two years. As a rough estimate the gross auto industry palladium stockpile could be as high as a year of new production. There risk of the
stockpile being fed to the market in the absence of a dramatic catalyst technology breakthrough is minimal, but not implausible.
Ford has already significantly reduced its palladium dependency through substitution and efficiency, and that technology will eventually filter through to the other vehicle manufacturers. The cumulative impact of the savings could be ruinous for producers in the short term.
There is little doubt that the numerous global pgm expansion plans announced in the last two years will be re-examined in some detail. They are unlikely to be cancelled outright, but development could be slowed sharply to ensure the supply-demand balance is not entirely disrupted.
South African mines can be expected to be the last to announce any revisions since they prefer a strategy of subduing competitors with their market power. They are content with lower prices provided they continue to dominate global output and keep new projects on the marginal list. |
