Platinum supply and demand nearer parity
'Third surplus in a row, but the good news for the industry is that the gap is steadily shrinking'
THE bad news for our platinum producers is that supply will still exceed demand in 1996. The good news is that it is a much smaller surplus than last year.
Johnson Matthey's Platinum 1996 Interim Review says that the overall platinum supply will decline by 3% on 1995 to 4,85-million oz, only 80 000 oz more than the expected demand of 4,77-million oz.
Mike Steel presented the interim review in Johannesburg while colleagues addressed audiences in New York and Tokyo.
Steel says the surplus is the third in a row, but it should be seen in the context of a platinum market that has risen from fewer than 4-million oz in 1992.
On the demand side, JM attributes the slight downturn to lower sales of platinum investment bars in Japan and to a shift in the platinum-group metal mix away from platinum for use in auto-catalysts.
Jewellery demand edged up to 1,84-million oz, and industrial demand will reach 1,065-million oz, the highest since 1979.
Steel notes a big rise in Chinese demand, with Western sales to China rising from 130 000 oz to 180 000 oz. Government regulations will enforce the wider availability of unleaded petrol and all vehicles applying for registration in Shanghai must be equipped with catalysts.
Chinese demand for platinum for jewellery fabrication is likely to top 100 000 oz this year. More jewellers have acquired the necessary skills and are producing to meet platinum's popularity with wealthier consumers. The need to modernise China's productive base is great and, consequently, industrial platinum demand is strong.
Steel says he is reluctant to make too much out of China - in contrast to gold's marketers who punt China as the metal's salvation.
However, as Steel notes, Japan has dominated the platinum jewellery market and it remains to be seen whether that love of white metal can in time be transferred to China.
Steel refers to Japan's extended recession: financial pressure has led to some reduction in the platinum pipeline, but he expects this slackness to be relatively short.
One bright spot on the demand horizon is an American government tender for 60 000 oz of platinum to mint eagle coins. "Americans have been very keen to buy their own coins and it will be interesting to see how platinum fares", says Steel.
Supplies of platinum from South Africa are expected to climb 1% to 3,42-million oz in spite of some loss of production during industrial disputes. Steel says cost control is uppermost as margins have been squeezed.
JM's best estimate of a platinum price over the next six months is $370-$400/oz and $105 to $135 for palladium.