Sarah Belfield - Reporter and writer, freelance

s a r a h b e l f i e l d

reporter & writer, freelance

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SURPLUS LOOKING LIKELY THIS YEAR

(Gold & Minerals Gazette, May 2006)

WITH platinum prices essentially on the up and up throughout 2005, all eyes are on what the precious metal will be doing in the year ahead.

"Platinum is likely to register a small surplus [over the next 12 months], but the emphasis here is on the word small," GFMS Analytics managing director Rhona O'Connell told Gold & Minerals Gazette.

GFMS Analytics — a division of the London-based independent precious metals consultancy GFMS Ltd — carries out analyses on the future implications surrounding market developments for gold, silver and platinum group metals.

Its call on the platinum surplus, according to O'Connell, was that it would be unlikely to exceed 200,000 ounces.

The division's parent, GFMS, expected a 2006 platinum price range of US$980-US$1250/ounce. The company released its Platinum & Palladium Survey 2006 in late April.

In the 12 months to the end of April, daily platinum prices ranged between US$859-US$1157/troy oz, according to data made available by Johnson Matthey.

O'Connell said the precious metal had been benefiting from a "tight fundamental position with low inventory" and from commodity investment in general.

"I would guess that the last US$150 or so have been directly attributable to the waves of funds coming into the commodities sector as a whole," she said.

"The first half of the year saw prices trading broadly sideways and the rally that started in August last year was from a base of US$900."

Emissions Tightened

She said one of the major influences on the supply-and-demand dynamics of platinum was the rising use of the metal as an autocatalyst. Platinum is used in diesel particulate filters and in the catalytic treatment of exhaust from gasoline(petrol)-driven cars, which involved the reduction of nitrogen oxides and the oxidation of carbon monoxide and unburned hydrocarbons.

Almost all countries were tightening vehicle emissions legislations, according to O'Connell.

"North America and Japan were first in the 1970s, Europe in the 80s, [and] the majority of the rest are following suit, although there are large variations in the levels permitted."

O'Connell said the European limits — which were simpler than those in force in North America — were generally taken as the template adopted elsewhere.

According to the 2006 GFMS survey, platinum's higher raw material prices, plus competition from gold and palladium, saw Chinese demand for platinum in jewellery drop by more than a quarter of a million ounces last year. GFMS listed China as the largest market in platinum jewellery.

And, in 2006, the demand for platinum in jewellery applications looked set to take another major hit in China, according to O'Connell. She said the switches being made in favour of white gold and palladium — with palladium being of interest "both in its own right and as an alloying element in white gold" — was more a function of price than fashion.

But one new development in the platinum jewellery scene was that Indian consumers were starting to buy the white metal.

Also commenting on what was probably in store in 2006, GFMS senior consultant Peter Ryan said in a statement that the consultancy expected platinum jewellery demand "to remain under pressure, with further losses probable".

"The real question has to be what impact current palladium prices will have on demand, especially in China. Last year's average was just US$201, [but] we are now some US$150 above that," he said.

He said China demonstrated price elasticity, as shown by that market's behaviour towards gold — and towards platinum in more recent times. So the same might happen to palladium.

"Although palladium jewellery is on the up, current palladium prices are likely to have an adverse effect on [palladium] demand this year."

Output Increasing

Last year, global platinum production was up 4% to 6.6 million oz, while global production of palladium posted the same proportional increase to reach 6.9 million oz, according to GFMS.

South Africa alone represented 56% of the global mine supply of platinum that year, and 38% of the palladium supply.

That country's platinum mine supply looked set to increase by 8% in 2006 (palladium by 9%). Partly responsible for the anticipated supply growth would be the arrival onto the market of concentrates stockpiled during the disruption surrounding the Polokwane smelter explosion in September last year.

In contrast, Russia's Norilsk Nickel was forecasting a 7% drop to 895,000 ounces for its platinum production.

GFMS said, overall, global platinum mine production should increase 6% year-on-year in 2006.

s a r a h b e l f i e l d reporter & writer, freelance

About Services Clips Ideas Contact	Sample clip SURPLUS LOOKING LIKELY THIS YEAR (Gold & Minerals Gazette, May 2006) WITH platinum prices essentially on the up and up throughout 2005, all eyes are on what the precious metal will be doing in the year ahead. "Platinum is likely to register a small surplus [over the next 12 months], but the emphasis here is on the word small," GFMS Analytics managing director Rhona O'Connell told Gold & Minerals Gazette. GFMS Analytics — a division of the London-based independent precious metals consultancy GFMS Ltd — carries out analyses on the future implications surrounding market developments for gold, silver and platinum group metals. Its call on the platinum surplus, according to O'Connell, was that it would be unlikely to exceed 200,000 ounces. The division's parent, GFMS, expected a 2006 platinum price range of US$980-US$1250/ounce. The company released its Platinum & Palladium Survey 2006 in late April. In the 12 months to the end of April, daily platinum prices ranged between US$859-US$1157/troy oz, according to data made available by Johnson Matthey. O'Connell said the precious metal had been benefiting from a "tight fundamental position with low inventory" and from commodity investment in general. "I would guess that the last US$150 or so have been directly attributable to the waves of funds coming into the commodities sector as a whole," she said. "The first half of the year saw prices trading broadly sideways and the rally that started in August last year was from a base of US$900." Emissions Tightened She said one of the major influences on the supply-and-demand dynamics of platinum was the rising use of the metal as an autocatalyst. Platinum is used in diesel particulate filters and in the catalytic treatment of exhaust from gasoline(petrol)-driven cars, which involved the reduction of nitrogen oxides and the oxidation of carbon monoxide and unburned hydrocarbons. Almost all countries were tightening vehicle emissions legislations, according to O'Connell. "North America and Japan were first in the 1970s, Europe in the 80s, [and] the majority of the rest are following suit, although there are large variations in the levels permitted." O'Connell said the European limits — which were simpler than those in force in North America — were generally taken as the template adopted elsewhere. According to the 2006 GFMS survey, platinum's higher raw material prices, plus competition from gold and palladium, saw Chinese demand for platinum in jewellery drop by more than a quarter of a million ounces last year. GFMS listed China as the largest market in platinum jewellery. And, in 2006, the demand for platinum in jewellery applications looked set to take another major hit in China, according to O'Connell. She said the switches being made in favour of white gold and palladium — with palladium being of interest "both in its own right and as an alloying element in white gold" — was more a function of price than fashion. But one new development in the platinum jewellery scene was that Indian consumers were starting to buy the white metal. Also commenting on what was probably in store in 2006, GFMS senior consultant Peter Ryan said in a statement that the consultancy expected platinum jewellery demand "to remain under pressure, with further losses probable". "The real question has to be what impact current palladium prices will have on demand, especially in China. Last year's average was just US$201, [but] we are now some US$150 above that," he said. He said China demonstrated price elasticity, as shown by that market's behaviour towards gold — and towards platinum in more recent times. So the same might happen to palladium. "Although palladium jewellery is on the up, current palladium prices are likely to have an adverse effect on [palladium] demand this year." Output Increasing Last year, global platinum production was up 4% to 6.6 million oz, while global production of palladium posted the same proportional increase to reach 6.9 million oz, according to GFMS. South Africa alone represented 56% of the global mine supply of platinum that year, and 38% of the palladium supply. That country's platinum mine supply looked set to increase by 8% in 2006 (palladium by 9%). Partly responsible for the anticipated supply growth would be the arrival onto the market of concentrates stockpiled during the disruption surrounding the Polokwane smelter explosion in September last year. In contrast, Russia's Norilsk Nickel was forecasting a 7% drop to 895,000 ounces for its platinum production. GFMS said, overall, global platinum mine production should increase 6% year-on-year in 2006.
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