Platinum deficit expected
Justin Brown
Johannesburg - Impala Platinum or Implats (IMP), expects the market for platinum metal to remain in deficit for the next three to four years until the planned expansion in platinum production comes on line, the group said in a statement to shareholders Wednesday.
Implats has forecast global platinum demand at 6.9 million ounces (Moz) in 2002 (6.4 Moz: 2001) and supply would have been 6.4 Moz (6.5 Moz: 2002), leaving a deficit of 400 000 oz.
In 2003, Implats expects platinum demand to be 7.2 Moz and supply 6.9 Moz, leaving a deficit of 300 000 oz.
Platinum supply targets to be missed
"It seems global supply targets to the year 2006 are increasingly unlikely to be met. Should the existing currently supply deficit grow, there could be increased market volatility and supply shortages. This is much the same scenario that occurred in the palladium market in the late 1990s," Implats said.
The high prices may slow growth in demand platinum, which in turn could lead to a lower price regime, as happened to palladium.
"The two key areas of platinum demand, jewellery and autocatalyts, are presently holding up well. Demand for platinum jewellery is being bolstered by strong growth in China, where increased sales have more than made up for declines in the US and Japan," Implats said.
In recent years, although off a low base, jewellery demand grew by 50% per annum. This has slowed somewhat in 2002 but will still achieve an estimated high of close on 1.5 Moz.
"There is still enormous potential for growth in jewellery demand in China. It is a vast country and out of 700 large cities, the Platinum Guild International's campaign to promote platinum jewellery has only targeted 10 so far," Implats said.
The resolution of outstanding tax issues will improve manufacturers' margins, leading to higher platinum sales.
"More attention is being given to improving the quality of designs and this too should boost sales. The economic outlook in China is also benefiting from the run up to the Olympics to be held in Beijing in 2008," Implats said.
Another positive consequence of the booming Chinese economy is the expected surge in auto sales. This will have a positive spin-off by way of greater demand for platinum for autocatalysts.
Globally, platinum demand for autocatalysts is expected to remain strong, underpinned by ever-stricter emission limits imposed in countries with existing limits and new limits being introduced elsewhere.
Increasingly popular diesel passenger vehicles in Europe are supporting demand too as diesel engine autocatalysts are platinum-based.
"The demand-side of the platinum equation is looking strong, the risk is that producers will not be able to expand fast enough to keep pace with increases in demand," Implats said.
Palladium less rosy
In the palladium market, things are looking decidedly less rosy, with the palladium price currently hovering close to a four-year low.
"Demand for palladium, which has been hard hit by the substitution in both automotive and electronic sectors, is expected to fall by almost 25%," Implats said.
Implats expects palladium demand to be 6.3 million ounces in 2003 and supply 6.7 million ounces in 2003, with the latter being more than sufficient to meet demand.
"With the lower price of palladium and more assured supplies, we expect a partial return to palladium by the automotive industry which is positive for the metal in the longer term," Implats said. - I-Net Bridge
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