By Leia Michele Toovey- Exclusive to Platinum Investing News

Tweet

Platinum has bounced more than 30 per cent since plunging to a five-year low of approximately US$732 an ounce in October. 

This ascent is occurring despite the absence of physical buying from the industrial sector. This rebound, without appropriate technical recovery is puzzling analysts. Gold prices and investment demand are believed to be driving platinum higher; however, over 60 per cent of global platinum use goes to auto catalysts, jewellery accounts for about 20 per cent of demand, whereas investment demand only accounts for 2.5 per cent. So, how investment demand is causing such a rebound is perplexing many.

This week, platinum was trading at US$991.00 an ounce, up US$3.00 from New York’s notional close, with gold prices also dictating movements. Gold was trading at US$898.60 an ounce, up US$3.60. Platinum may trade at an average $1,010 an ounce this year, 26 per cent below its previous forecast, Credit Suisse Group said in January.

Low prices have given platinum some attraction in India markets.  Investment demand for the precious metal as a store of value amid a global economic slowdown is increasing.  Some investors buy platinum and palladium, used mostly in jewellery and auto parts, to hedge against declines in other markets. In normal circumstances, Indians buy gold, but the price crash has made platinum more lucrative. Suddenly, sales have gone up almost 25 per cent.

British platinum specialist Johnson Matthey (JM) said on Monday it expects a less than 5 per cent rise in world platinum output this year, while demand would fall by roughly the same margin. “Production should be slightly up in 2009, its not all doom and gloom with all the closures of mines in South Africa, we should see some growth in 2009 of less than 5 percent,” Peter Duncan, General Manager for market research at the world’s top platinum refiner said.  On the demand side, Duncan said the car sector had been hit by the financial crisis, but investment demand was solid. “It is going to be a fairly close call, but I would say the market should be in balance this year,” Duncan added.

JM had previously said the platinum market would see a deficit of 240,000 ounces this year compared with a revised 120,000 ounces last year. He said JM would keep to its forecast of $700 to $1,400 per ounce which it gave in November last year, and that it would fine tune its projection in May. In November, JM said platinum prices could fall to $700 an ounce over the next six months if the economic crisis continued battering the world economy and investors shunned the metal.

Aquarius Platinum Ltd’s Chief Executive Officer expects the tough market conditions in the platinum sector to ease off in the second half of 2009. ‘I think we’ve got a few more tough months ahead of us and then things should start turning,” CEO Stuart Murray said. “I think in quarter three, quarter four things will start to turn.” The group cut its 2009 production target by 100,000 platinum group metal ounces to 475,000 ounces.

Company news

Anglo Platinum Ltd recently announced that its annual profit rose 15.5 per cent on higher U.S. dollar prices for the metal. Net income rose to 14.24 billion rand ($1.47 billion) from 12.33 billion rand a year earlier. “The primary factors contributing to the increased earnings were higher dollar prices realized on metals sold, a weaker rand/dollar exchange rate, and a lower effective tax rate,” Anglo Platinum said. The company sells the metal for dollars and pays wages and other costs mostly in rand. Sales volumes fell because of reduced production from its processing operations, the company said. Output fell to 2.39 million ounces of platinum.  Anglo Platinum cut its 2009 capital expenditure plan by about a third to 9.1 billion rand last month and delayed spending on several projects. The company may produce about 500,000 ounces less-than-expected this year, JPMorgan said last month.  Anglo Platinum has decided to cut 10,000 jobs. Chief Executive Officer Neville Nicolau made the job-slashing announcement Monday in Johannesburg. Some 8,000 contract workers, many of them South African miners, will be let go during the first half of the year. An estimated 2,000 staff members who are retiring will not be replaced.

Comment

Tweet