Long-term platinum fundamentals looking good – Johnson Matthey

While prices may have fallen around 11% in recent months, there are indications that platinum could be bottoming out.

Author: Geoff Candy
Posted:  Tuesday , 27 Jul 2010

GRONINGEN - 

The price of platinum has fallen around 11% since hitting a 21-month-high in late April, largely on the coat tails of the sovereign debt crisis in Europe.

But, according to Johnson Matthey’s GM for Market Research, Peter Duncan, both the supply and demand side of the market would suggest the metal is likely to maintain its current level, if not go higher during the course of the rest of the year.

Speaking on Mineweb.com’s Metals Weekly podcast, Duncan declined to give an actual forecast but, said, “Supply at best is going to grow a little bit – it’s certainly being hit by a number of issues and it’s going to struggle to grow at a fast rate”.

On the demand side, he said there is some uncertainty as to whether we are likely to experience a double-dip but, added, ” I would certainly expect demand to be stronger this year in all the industrial applications than it was last year. Jewellery remains quite firm and investment demand likewise seems to be quite sticky.

“So the demand side seems to be holding up quite well and all of that points to a market that is moving closer to balance than last year.

Supply Side:

The big story over last week was the directive out of the South African government’s department of mines about the bord and pillar mining technique and, more specifically, about the space between the pillars. The directive was aimed primarily at Aquarius Platinum, which uses the technique more than most and had just suffered two fatal accidents at its mines.

While the knee-jerk reaction from the market saw Aquarius’s shares plummet, it has subsequently recovered some of its value and, according to Duncan it is too early yet to say what the actual impact of the directive will be.

“The producers themselves are still struggling to interpret exactly what’s required and how they’re going to handle it. But if you look at the overall production from the area that’s immediately affected, we’re talking about platinum and chrome mines in the North West region – the Western Bushveld, south and east of the Union Section – so that amounts to a total annual production of platinum of just under half a million ounces.  So it’s going to be a percentage of that.  I’ve heard different figures of up to 20%, 25% and down to virtually nothing – the 20%, 25% is probably an exaggeration and more likely we’re going to see [a drop of] 10% to 15% – it’s a bit early to say but I’d be very surprised if it were more than 100,000 ounces a year”.

Over and above the potential impact of more pillars underground, Lonmin too came out with an announcement saying that its refined platinum sales were down almost 50% and, as Duncan says, there are certainly a lot of one off announcements in the platinum sector: “We always call them one-off but they seem to happen every year, don’t they.  There’s always some little bit of bad news that dents production”

But he still expects some modest growth in overall South African platinum supply.

Asked about other sources of supply, he says Russian and North American supply is expected to remain fairly consistent.

“The growth potential, all other things being equal, is in Zimbabwe where there are still significant reserves of platinum and where they’re growing in percentage terms, quite strongly in the last few years – but obviously that has its own potential difficulties going forward.”

Demand:

While auto-sector demand for the metal still makes up around half of current usage, Duncan points out that last year there was a dramatic fall off in auto usage and jewellery rose to fill the gap, becoming over 40% of the total market.

And, he believes that there is still a long way to go on the jewellery front. ”

“The biggest market by far for platinum jewellery is China – although demand has fallen off a bit this year – that’s hardly surprising because we saw a large period of stock building in the first half of 2009 which is unlikely to be repeated.  But the underlying demand in China is still very strong, and almost irrespective of price, we see that that has a long way to go before it approaches any ceiling,” he says.

From an autocatalyst point of view, which remains the major source of platinum demand, Duncan says the most important thing to focus on is the diesel car’s share of the European market which dipped quite significantly last year.

“What’s really going to be important going forward, is how quickly the diesel share of the market recovers. We’re certainly seeing signs of diesel recovery so far on the fleets, which are typically dominated by diesel, so those are starting to come back in.  So really, going forward it’s a case of European diesel share recovery driving platinum demand and at the same time, in the same way that the industry ran down on the stock of vehicles – production fell last year by a lot more than sales fell.  This year it will be the opposite – we’ll probably see a build up again of car inventories and of course that will drive demand for PGMs and catalysts, so overall a fairly positive picture but seeing into the future at the moment is quite difficult.

The third prong of the demand trident is also the youngest – ETF or investment demand. Here Duncan admits that there is very little history on which to judge the way that they’ll behave to movements in price.

But, he adds, “So far we’ve seen significant growth in ETF investment this year, after the launch of the US-based ETF fund. How much of that of course is pent up demand and how much reflects what demand will do going forward is a little bit more difficult to say. 

“Certainly the demand – the rate of growth in cumulative holdings has fallen, but there’s no real evidence here that people haven’t taken any profit and in fact the cumulative demand in ETFs has just grown irrespective of what price has done – so we saw no or very little exiting of positions when the price dropped recently and the curve has continued to go smoothly upwards.  ETF investment – difficult to say what’s going to happen long term but so far, it’s looking fairly sticky, as we say – it’s looking to hold onto the platinum that it’s bought

Article courtesy of www.mineweb.com

Platinum prices expected to gain this year, albeit slowly

As economic recovery continues gradually, analysts expect the resultant rise in demand to push up prices of the metal used predominantly in autocatalysts

Author: Jan Harvey (Reuters)
Posted:  Thursday , 22 Jul 2010

LONDON (Reuters) - 

Analysts see platinum prices rising as a gradual economic recovery leads to increased demand for the autocatalyst metal, but some of the euphoria that lifted forecasts earlier this year has evaporated after a hefty correction in May.

Platinum is now seen averaging $1,600 an ounce in 2010, a Reuters poll of 40 analysts, traders and fund managers showed, up from a January forecast of $1,553.75 an ounce.

But the latest forecast is well below that shown in a smaller poll conducted ahead of London Platinum Week in May, during which platinum and palladium, which had outstripped gains in other precious metals early in the year, slipped sharply.

That poll of 26 analysts gave a median forecast of $1,650.

While platinum bulls are pinning their hopes on expectations for an economic recovery, some caution remains after a spate of gloomy U.S. data. Prices slid in May as recovery hopes faded and fears of a double dip recession came to the fore.

Those fears are reflected in analysts’ forecasts for gold.

But analysts still expect to see broad global economic growth lifting car sales, in turn raising demand for platinum and its sister metal palladium.

“Although bearish sentiment is hindering upward price momentum, we expect auto demand to rebound this year and glass and chemical usage to recover as the economy recovers,” said Barclays Capital analyst Suki Cooper.

“Supply disruptions have been limited in the first half of the year, (but) as wage negotiations unravel and safety-related stoppages come under scrutiny in South Africa, we believe supply growth is set to be constrained.”

In the remainder of 2010, prices are expected to average $1,580 an ounce in the third quarter, rising to $1,630 in the last three months of the year. Spot platinum was trading just above $1,500 an ounce early on Wednesday.

In 2011, the median platinum price forecast climbed to $1,700 an ounce.

Platinum prices rose 19 percent in the first four months of the year, but failed to hold onto those early gains.

“The long run-up in platinum’s price was largely driven by investment demand, helped along the way by a recovering economy,” said BNP Paribas analyst Anne-Laure Tremblay.

“The recent correction came about as doubts emerged as to the solidity of economic growth on one hand, and receding investment demand on the other.”

PALLADIUM SEEN RISING

Palladium prices are seen averaging $472 an ounce this year, up from a January forecast of $434 an ounce but well below that shown in the pre-Platinum Week poll of $488 an ounce.

In the third quarter prices are expected to average $460 an ounce — above their current level of around $445 — with forecasts rising to $494 an ounce for the fourth quarter.

Palladium strongly outperformed other precious metals in the first quarter, rising 17.6 percent against gold’s 1.6 percent and silver’s 3.9 percent. It fell 7.4 percent in the second quarter, but remains up 14.7 percent year-on-year.

In 2011, palladium is expected to average $519 an ounce, up from a January forecast of $480 an ounce and a pre-Platinum Week forecast of $500 an ounce, due to expectations for improving demand.

“As the economy improves, demand for palladium from fabricators will add further support to prices in 2011,” said Rohit Savant, an analyst at CPM Group in New York.

“Relatively new investment vehicles such as ETFs have added additional support to palladium prices in recent years and are expected to continue doing so in the near future.”

New platinum- and palladium-backed products launched in the United States earlier this year by a unit of London’s ETF Securities helped support expectations for stronger demand.

Inflows of both have steadied in recent months but holdings remain relatively firm. The U.S.-based ETFS Platinum Trust now holds just under 304,000 ounces of metal, while the ETFS Palladium Trust holds just over 780,000 ounces of palladium.

(Additional reporting by Pratima Desai in London, Ruchira Singh in New Delhi, Rujun Shen in Shanghai, Frank Tang in New York, Nicholas Trevethan in Singapore; Editing by Sue Thomas and Veronica Brown)

Thursday, July 22, 2010

American Palladium Eagle Bullion Coins Sought

Still No 2010 Proof Gold and Silver Eagles

In its long-term outlook for platinum group metals, CPM said investment demand for PGMs, which has had an effect on recent prices, has been motivated by expectations of future price rises as global economic activity emerges from recession. It is worth bearing in mind that, unlike gold, PGMs are largely industrial metals – in round figures, three-quarters of the world’s annual platinum demand is for industrial uses, particularly for vehicle exhaust catalysts.

So, sticking with platinum alone, CPM reckons that supplies of newly mined metal will remain insufficient to satisfy demand and that, through to 2013-14, the balance between supplies of new and recycled metal could be particularly tight.

By 2014, however, production mothballed at the start of the recession in 2008 will be back on stream, expansion projects put on ice by the major mining companies will have been ramped up and the many newcomers will have brought new mines on stream.

The growth will be largely from South Africa, though CPM is cautious about the effects of safety stoppages, power interruptions and so on. Supplies of by-product PGMs from base-metal mines in Russia and Canada should be rising in parallel with nickel production.

All this is at a time when industrial demand is recovering and secondary supplies are increasing, leading to a period of rising real (inflation-adjusted) prices until 2014. This is projected to be followed by a decline through to 2016, with well-balanced supply and demand, to be followed by further advances to 2019 as the market again tightens.

Moving away from real prices to those in nominal terms, CPM forecasts a steady rise for platinum from last year’s $1212/ounce to average $1573 this year. It is expected to rise to $2035 in 2014.

Then, there is a fall to below $2000 predicted last until 2017 when the $2000 mark is expected to be breached again. By 2019, CPM reckons, platinum’s average price will be just shy of $2190/oz in nominal terms.

As might be expected, much will depend on speculative trading. While investment demand continues to be driven by expectations of the effects of rising industrial demand on prices, CPM warns that selling in anticipation of eventual price declines could well exacerbate falling prices. On the other hand, if or when prices do start to slip, investors might well decide to buy at the then lower price.

The advent of investment demand, particularly by US and European exchange-traded funds, has added a significant imponderable in the market for what was once almost entirely an industrial metal. It could only take a few more currency scares for platinum to move way beyond even CPM’s predictions.

By Terry Wooten
New York — (Kitco News): Rhodium prices could rise substantially during 2010, driven largely by strong fabrication and investment demand, the CPM Group Platinum Group Metals Yearbook 2010 said Tuesday.

The report by the New York-based metals consultancy also said price support will be accentuated by the concentration in the metal’s supply and demand. CPM said about 72 percent of rhodium’s supply comes from South Africa. Output there has benefitted from the increased mining of the rhodium rich UG2 ore body.

“A shortfall of resources such as electricity, water and labor, however, could compromise mining activity in South Africa,” CPM said. The report noted such factors affected production in 2008 and helped drive rhodium to record highs.

CPM said that about 85% of rhodium’s fabrication demand comes from auto catalysts. “The concentration of fabrication demand has been and seems likely to continue to play an important role in driving the price of the metal higher during 2010,” CPM said in the Outlook.

“After weakening over the past two years, the global auto market is expected to show strength this year,” the report said. “This, coupled with the global tightening of emission standards focused on reducing NOx emissions, is expected to boost fabrication demand for the metal during 2010 and beyond.”

The Outlook noted that total rhodium supply in 2010 is projected to rise 4.8% to 1,054,820 ounces. In 2009, total supply was 1,066, 217.

An increase in South African production was largely responsible for the increase in rhodium min production, which was up 4.0 percent from 2008, CPM said.

South African rhodium production in 2009 was 722,407 ounces, up 14.1 percent from 2008 levels. The increase followed two consecutive years of decline due to a range of production problems that plagued the PGM mining industry in that country.

CPM said the growth rate in South African rhodium has been greater than the growth rate of South African platinum and palladium production. “This no doubt reflects increased focus on the rhodium-rich UG2 ore body and efforts to increase the recovery of rhodium from all ore processing, given the tight market conditions and high prices for this metal” CPM said.

CPM noted that investor activity in rhodium increased when the price was rising in 2008. The report noted that investors typically buy an asset when the price is on the rise, even though that may not be the best strategy.

“If investors purchased this metal at the time when rhodium prices were peaking in 2008 they may be highly unlikely to liquate their positions and most likely would hold on to their metal for at least a few years in anticipation of prices reaching those high levels once again, CPM said.

Likewise, the report said, those who bought the metal closer to $2,000 are not likely to liquidate their positions in anticipation of maximizing their profits. Several trading companies and investors bought rhodium in late 2008 and early 2009 when prices had dropped into a range around $1,050 to $1,400, CPM said.

The Outlook emphasized that hedge funds and wealthy individuals are typical investors in physical rhodium One Canadian retailer of precious metals this year began offering one ounce, five ounces and ten ounces of pure rhodium sponge. “There is a possibility that the investment market for this metal will expand following this move,” the report said.

Courtesy: coinlink.com

Strong fundamentals positive for platinum group metals – CPM

Investors are expected to remain attracted to platinum in 2010 because of potential price appreciation based on the metal’s tight supply, increasing fabrication use and investor demand.

Author: Dorothy Kosich
Posted:  Tuesday , 29 Jun 2010

RENO, NV - 

A combination of constrained supplies, rising fabrication and increased investor interest in PGMs is expected to drive these metals prices higher in the near future, New York metals consultants CPM said in a presentation Tuesday.

In CPM’s Platinum Group Metals Yearbook 2010, the analysts expect platinum demand to benefit from the global economic recovery this year.

Investors purchasing platinum for its safe haven attributions are likely to be outnumbered by those purchasing the metal for its tight market balance. Nevertheless, CPM said, “Investors are expected to remain attracted to platinum because of the potential for price appreciation based on the metal’s positive supply and demand fundamentals.”

Platinum ETF investment holdings are forecast to continue to rise this year.

“Given the forecast for strong investment demand during 2010, there is an expectation that there will not be sufficient metal coming into the market from newly refined supplies to meet both rising fabrication demand as well as robust investment demand,” CPM suggested. “This scenario suggests an extremely tight market, which would push platinum prices higher.”

CPM forecasts that global platinum mine production may rise 5.6% this year to 6,658,461 ounces. 

The largest platinum producer South Africa “is confronted with certain resource constraints which are not expected to be resolved in the near future and are expected to inhibit supply from the country, irrespective of how high metals prices rise.”

New mine production coming on line is expected to boost South African output to 5,112,174 ounces this year, up from 4,845,000 platinum ounces mined in South Africa in 2009.

Platinum production from Russia is forecast to increase from 831,000 ounce in 2009 to 890,000 ounces this year, according to the yearbook.

CPM projects that total newly refined platinum supplies will rise 5.5% from 7,043,000 ounces last year to 7,468,461 ounces this year.

Secondary platinum recovery, which fell 25% last year to 750,000 ounces, is forecast to increase 8% this year to 810,000 ounces due to the present improvement in platinum prices and pick up in the auto sector.

“Platinum fabrication demand is forecast to rise at a healthy pace during 2010,” CPM advised, “driven largely by an improvement in global economic activity and restocking of metal by users.”

Total platinum fabrication demand dropped 4.1% to 6,584,000 ounces in 2009. The yearbook projects fabrication demand will recover 8.4% to 7,137,000 ounces this year.  However, CPM predicts the growth in demand for platinum jewelry during 2010 “is forecast to be relatively weak compared to 2009.”

“The declining platinum price volatility, at least during the first three months of 2010, coupled with an improving economic environment that could boost discretionary spending among consumers, are both factors that could supply platinum jewelry demand,” CPM suggested.

In their analysis, CPM noted investor interest in platinum futures remained high in 2009 and early this year. Commodity funds and other institutional investors held large net long positions throughout last year.

Combined trading volumes of platinum declined 30.4% to 101.7 million ounces on Nymex and Tocom last year.

Unfortunately, there were no Platinum Eagle coin sales by the U.S. Mint in 2009 because the Mint had run out of coins due to strong investor demand. “The Mint plans to produce these coins sometime around July or August this year,” CPM advised.

PALLADIUM

Total palladium supply reached 7.6 million ounces last year, the third consecutive year that total palladium supply declined.  This year total supply is expected to increase 8.2% to 8,265,706 ounces, according to CPM’s forecasts.

However, CPM cautioned, “The increase in supply is not expected to be enough to meet the needs of both fabricators and investors.”

Meanwhile, total palladium fabrication demand dropped 7.5% last year to 7,170,500 ounces. Total fabrication demand is forecast to increase what CPM called “a healthy 8.2% pace in 2010, reaching 7,795,000 ounces.”

In their analysis, CPM said palladium investment demand rose sharply last year and in the first quarter of 2010 due to several factors including the expectations of a tight supply/demand balance in the palladium market. The launch of a new palladium backed investment products and the continued increase in investor interest in commodities as an asset class also generated palladium investment demand.

Trading volume for palladium on both Nymex and Tocom was a combined 45.5 million ounces last year, down 44.1% from 81.4 million ounces traded in 2008.  Combined inventories of palladium in both Nymex and Tocom vaults were up 46.1% for a total of 673,735 ounces at the end of last year.

RHODIUM

Newly refined total rhodium supply was up 4% at 1,006,217 ounces in 2009. Total supply of newly refined rhodium is projected by CPM to increase 4.8% to 1,054,820 ounces this year.

The growth rate in South African rhodium production has been greater than the growth rates of South African platinum and palladium production, CPM observed. “This no doubt reflects the increased focus on the rhodium-rich UG2 ore body and efforts to increase the recovery of rhodium from all ore processing, given the tight market conditions and high prices for this metal.”

Nearly 85% of mined rhodium supply comes from South Africa. “Due to this concentration, total rhodium supply is sensitive to the various factors pertinent to South African mining,” CPM said.

“Rhodium mine production in South Africa will be negatively affected by the tightness in and any potential future shortfall of South African electricity supply, as well as labor issues. Rhodium supplies meanwhile will be positively affected, to some extent, by the ongoing reliance on UG2 ore in PGM mining.”

Overall South African mine production of rhodium is forecast to total 754,061 ounces this year, up 4.45% from 2009.

Rhodium production in Russia is expected to increase to 87,000 ounces this year, according to the yearbook.

CPM also forecasts that total rhodium fabrication demand may rise 11% to 992,273 ounces this year.

To order the CPM Group’s Platinum Group Metals Yearbook 2010, go to www.cpmgroup.com

by stuart on June 28, 2010

Standard Bank ran an interesting analysis of current palladium movements last week in an investors note. While cautioning that the evaluation of import and export data is only one part of a much larger supply/demand and investor sentiment dynamic we would agree there are some interesting directional trends highlighted by the bank’s analysis.

Broadly the note reviews the movement of platinum and palladium into and out of Switzerland. As the global hub for these metals, such movements can be very informative. Switzerland was a net exporter of 336,291 oz of platinum in May according to Standard Bank. This is the largest net export number for Switzerland in more than two years, indicating a strong demand due, the bank believes, the lower platinum price. The main destination of exports was the UK (140,059 oz), China and HK (140,556 oz) and Germany (52,844 oz).

The majority of exports to the UK appear to be sponge, which signals industrial demand and not ETF related flows. This is confirmed by ETF holdings that were largely unchanged during the month. The bank believes platinum has shifted to the UK for Loco London settlement on the London Bullion Market.

In May, China imported the largest volume of platinum from Switzerland since Feb 2009. China’s imports of platinum have steadily declined since Feb 2009 the bank says as the platinum price recovered, reaching only 16,800oz in Apr 2010. For China to be back in the market now suggests three issues:

• China is price sensitive and has proved to be a buyer when prices drop

• For China to be buying now suggests they see current prices as good value – previously they were buying when platinum was around $1050 per ounce

• Last, China demand supports the bank’s own cost curve model which shows platinum is good value below $1500 per oz

With palladium, the figures are a little different. Although Switzerland was again a net exporter in May at 170,000 oz and again the UK was a large importer at 188,000 oz, China was largely absent in Swiss export figures suggesting demand is relatively weak at current prices. Indeed China has now been a net exporter of palladium to Switzerland since Dec 2009. As with platinum, the majority of palladium exports to the UK appear to be sponge which signals industrial demand and not ETF related flows. Palladium ETF holdings were largely unchanged during the month so, as for platinum, the bank sees the same inventory shift for Loco London settlement in evidence.

In summary, the bank sees the above movements, taken in isolation as supportive of further price strength in platinum but neutral for palladium.

–Stuart Burns

LONDON (Commodity Online): Is platinum outperforming gold as far as hallmarking is concerned in the United Kingdom? It looks so. Recent data shows that demand for platinum hallmarking is surging while the same for gold is coming down.

According to the Birmingham Assay Office, 22,848 items received a platinum hallmark during May, representing a year-on-year increase of 12 per cent.

In fact, platinum hallmarking is on a record surge in the UK as no other metal including gold is in demand as platinum.

Michael Allchin, Chief Executive and Assay Master at the office, suggested that the figures for palladium are encouraging, considering it only recently received precious metal status in the UK.

Overall hallmarking increased by 1.4 per cent, with silver further contributing to the strong showing among white metals by posting a 9.4 per cent rise to 657,040 items.

However, gold saw a decline of 11.8 per cent to 404,091 items, while nine-carat gold was the worst-performing category, registering a decrease of 16.4 per cent.

“This is a continuation of the trend we have been seeing now for several years with gold continuing to struggle, particularly nine-carat gold,” Mr Allchin told Professional Jeweller web site.

Hallmarking of gold by the four UK Assay Offices was down 11.8 percent to 404,091 items, with 9ct gold hit the hardest at 16.4 percent.

The year-on-year drop in May of gold items hallmarked was attributed to a continuing rise in gold price.

Birmingham Assay Office said: “This is a continuation of the trend we have been seeing now for several years with gold continuing to struggle, particularly 9 carat gold. We are not seeing any growth, just continued month on month decline. I don’t think this is going to change soon, as long as prices remain so high.”

Hallmarking overall rose for the month by 1.4 percent, with white metals continuing their upwards trend. Silver showed a 9.4 percent growth in items hallmarked to 657,040, but platinum showed the biggest rise at 12 percent to 22,848.

Introduced as a precious metal this year, palladium proved popular with 10,000 items hallmarked in May, though it was down on the 11,000 April figure.

“Ten thousand units in a month is very encouraging for a brand new metal though,” said Allchin.