Platinum prices set to ease in 2005

Platinum demand, for the first time in six years, will fall short of supply, leading to softer prices for the precious metal. Demand was expected to grow at less than one per cent at least for the next six months.

Johnson Matthey, a major distributor of platinum for over 150 years, has predicted that supplies of platinum, in 2004 and early 2005 will expand faster than demand, so that the market will move into surplus for the first time in six years.

This will lead to softening of the platinum price, in the range $760 to $880 per oz for the next six months in the international market.

The platinum price in the international market averaged $845 per oz in the first ten months of 2004 which was up 25 per cent year-on-year supported by firmness of overall demand.

Platinum demand was expected to grow by less than one per cent and the platinum market would be close to equilibrium in 2004, according to Johnson Matthey in its latest survey, "Platinum 2004 Interim Review".

The Platinum marketing company has also predicted that increased demand for the metal from the automobile and glass industries will largely be offset by weaker purchases of platinum by jewellery manufacturers to bring total demand in 2004 to 6.47 million oz, a rise of just 50,000 oz on 2003.

"Platinum demand in the auto segment was up because of strong European market for diesel engine cars, which use platinum autocatalysts, and because of tighter emissions regulations being introduced in Europe and Japan. The expansion of liquid crystal display (LCD) glass manufacturing in Asia has also boosted demand for platinum in the industrial sector, but the high price of platinum has affected Chinese jewellery demand for the second year running, with manufacturers reducing stocks and diverting production into other white metals," the report mentioned.

"Although lower Russian sales of platinum were expected in 2004, higher output from Canada and South Africa would more than compensate and total supply was forecast at 6.43 million oz, up 230,000 oz against 2003. This was expected to significantly narrow the gap between supply and demand, leaving a market deficit of just 40,000 oz," it said.

The palladium market on the other hand was set for another one million oz surplus in 2004 which witnessed limited price movement despite demand recovery and strong speculative buying. Demand for palladium was forecast to rise by 730,000 oz to 6.14 million oz.

Purchases by the auto industry were projected to grow in 2004 as US auto companies use less metal from inventory and as global light vehicle production rises. However, the largest factor in the increase will be the introduction of palladium jewellery in China.

Purchase of palladium in the first quarter of 2004 climbed as jewellery wholesalers and retailers established stocks. Supplies of palladium in 2004 was projected to rise by 700,000 oz to 7.16 million oz.

The market surplus, which was forecast to reach 1.02 million oz this year, has affected the price of palladium.