Platinum may still be in deficit despite car sales drop

Edison Investment Research says ahead of the Platinum Congress in London that it expects the platinum market to still have a deficit of 1m ounces from 2009-2014.

Author: Tessa Kruger
Posted:  Monday , 13 Oct 2008


Amid doom and gloom surrounding platinum demand from vehicle manufacturers, there is an alternate view that the platinum market will still be in deficit of 1m ounces in the medium term as lower demand from car producers in the developed world is offset by rising demand from the East.

Senior mining analyst at Edison Investment Research Charles Gibson said today he believed the platinum market would be in deficit of 1m platinum ounces from 2009 until 2014. The view was based on platinum companies' projections of platinum production in the medium term and forecast global car production.

Gibson told Mineweb ahead of the World Platinum Congress to be held in London next month that although he did foresee falls in autocatalyst demand for platinum from the United Stated and Europe, demand from places such as China and India would offset the decrease to an extent.

Against this background, the senior analyst said it could be opportune for the patient investor to invest in platinum at current levels. But the investment research company did foresee that there could be further downward pressure on the platinum price in the near term if redemptions from platinum Exchange Traded Funds (ETFs) resumed.  

There has recently been a flight from platinum ETFs on the back of expected lower autocatalyst demand. "This is the joker in the pack; it is conceivable that redemptions will continue in the short term," said Gibson.

He said the investment research firm expected a platinum price of $1,600 in the medium term. It saw the price taking off again on news of the next supply shock. 

Edison mining analyst Michael Starke said emerging markets would keep car production figures - an indication of autocatalyst demand - relatively high as demand in developed economies such as North America and Japan fell off.

He pointed out that although vehicle production growth would come mainly from emerging markets, this growth would only act to keep vehicle production healthy and would not override all losses.

Starke said redemptions from the platinum ETF in London, ETF Securities, have slowed down, while the Swiss ZKB platinum ETF was still building up slowly.

ETF Securities has seen a dramatic drop in holdings from its peak of 418,000 ounces at the beginning of July to 191,000 ounces on Thursday, 9 October. The analyst said fluctuations in platinum ETFs had an exaggerated effect on the price as it was backed by the physical metal, while the market was illiquid. ZKB's holdings has built up steadily from 22,000 ounces at the launch of the fund in May 2007 to the current level of 105,000 ounces.

Platinum fell to $986/ounce during the morning fixing in London on Monday from $1,001/ounce on Friday.

Jean-Louis Kayitenkore
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