PLATINUM prices are expected to hit highs of 1550/oz in the next six months as the global demand for the precious metal recovers, according to the latest Platinum Review released yesterday by global refiner Johnson Matthey.
Expected recovery in the global car manufacturing sector, a major user of platinum products, and the strong jewellery market are expected to help propel demand and push the price of the metal to highs last reached about 15 months ago.
But South African platinum miners, which supply more than 75% of world platinum, may not reap the benefits of rising prices because of the strong rand. This is despite platinum sales from SA that are forecast to rise 5%, while supplies from other world producers such as North America and Russia are expected to fall.
“The local currency strength is squeezing local companies’ margins, and the high platinum prices are not filtering through to the profitability of South African companies,” said Mark Bedford, precious metals marketing director at Johnson Matthey.
South African gold and platinum miners have had to cut production in the past year because of weaker demand, rising costs, low metal prices, electricity tariff and wage increases, as well as labour and safety stoppages at some of the shafts.
Supply of platinum from SA is expected to grow 5% to 4,73- million ounces this year, boosted by stockpiles accumulated last year countering lower underlying output, according to the Johnson Matthey report.
“There is very little argument for further cutbacks in production in SA (as) global supply is expected to move into a deficit by the end of this year,” Bedford said.
Platinum prices fell to below 1000/oz towards the end of last year due to the global downturn, after hitting highs of more than 2000/oz earlier last year. Platinum prices have since recovered more than 50%, largely due to a weaker dollar, a firmer gold price and investor interest . Demand had also been helped by a recovery in the vehicle manufacturing sector as well as a strong jewellery market, especially in China and Japan, Bedford said.
“Overall, the platinum market should tighten in 2010 and could move into a modest deficit as the world economy improves. These positive fundamentals might be expected to support the platinum price. However, with much of the price rise from September having been driven by a weak dollar, a strong gold price and by growing investor interest, external factors are likely to be more important,” the report said.
The report said prospects for the dollar were unclear but it seemed that, despite the large positions in the gold market, the price of the metal should gain support either from the threat of inflation or concern about the health of the world’s economy.
“If this proves the case, a recovery in demand for platinum could send it trading as high as 1550 during the next six months.
“If the dollar strengthens or investors reduce their exposure to gold, then the platinum price could suffer, falling as low as 1280,” it said.
