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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (1205)	3/26/2002 9:31:22 AM
From: craig crawford	Read Replies (1) \| Respond to of 1643

Platinum Spikes online.wsj.com But auto demand fails as an explanation By David Bogoslaw prices have risen sharply since the year began, defying the expectations of those who argue the market's underlying supply and demand fundamentals haven't changed. The benchmark April contract on the New York Mercantile Exchange has rallied about 18% since early February, from $450 to a peak of $525 in March. Yet platinum's sister metals, palladium and rhodium, haven't been taken along for the ride. Since catalytic converters, which clean auto fuel emissions, rely on all three metals in various combinations and proportions, some analysts doubt that surprisingly robust car sales deserve full credit for the platinum price spike. Besides, the bulk of the platinum consumed worldwide is invisible to the international spot and futures markets, the locus of recent price spikes. That's because it has been pre-sold by producers to manufacturers under long-term contracts. "I don't think much is going on in auto demand at the moment" beyond light interest in Europe, says John Reade, an analyst at UBS Warburg in London. "Most of the platinum that car companies consume is purchased directly from producers and is invisible. Only when demand exceeds these contractual shipments does car-company demand spill over into the OTC [over the counter] market, and certainly there is no sign that's been taking place." Those who tie platinum's fortunes tightly to automotive demand worry that comparatively strong car sales can't be sustained. They argue that demand has been borrowed from the future, as recession-provoked incentives such as zero-percent financing and cash-back offers have tempted consumers to buy new cars ahead of when they normally would have. U.S. car sales dropped by only 3.5% in February from strong levels a year earlier, surprising analysts who were expecting a decline of 8%-10% from last year. The big question, according to Gordon Bassett, U.S. general manager of precious metals at Johnson Matthey, a leading global refiner and fabricator, is to what extent car makers want to maintain strategic stocks. That will determine how soon they seek to replenish depleted supplies. Bassett points to the diversity of applications for platinum to explain its price premium over palladium. Jewelry fashion, for example, has shifted toward white metals and away from gold, and demand for platinum jewelry now rivals global consumption of the metal in auto catalysts. ............................................................................................................................. Regardless of current platinum prices, automotive demand is poised to explode over the next decade as a result of more stringent emissions standards globally and the growing popularity of diesel vehicles. Diesel catalysts rely strictly on platinum and will require increasingly large loadings of the metal, which have already risen significantly to meet new European standards. European consumers have flocked to diesel because of its fuel efficiency. Mark Gulley, managing director and senior specialty-chemicals analyst at Banc of America Securities, expects demand for diesel catalysts to ramp up to $900 million by 2010. He believes the value of the precious-metals content to exceed the average $100 worth of content in gasoline catalysts.