Platinum Supply and Demand

Platinum Supply

Platinum supplies from South Africa totalled 5.11 million oz in 2005, up by 100,000 oz compared with the previous year. Output of refined metal from Anglo Platinum was unchanged at just over 2.45 million oz, falling short of the companyís intended output of 2.6 to 2.7 million oz. This was primarily due to an explosion at the groupís Polokwane smelter in September that resulted in 120,000 oz of platinum accumulating in unprocessed stocks of concentrate.

Refined platinum production from Impalaís main lease area on the western Bushveld rose by 6 per cent to almost 1.16 million oz last year thanks to increased mill throughput and a significant improvement in concentrator recoveries. The developing Marula Platinum mine on the eastern Bushveld, however, contributed only 31,000 oz of platinum in concentrate as the operation began making a transition from mechanised to conventional mining.

Lonmin produced 963,000 oz of platinum in 2005, a record for the group. Output from the companyís western Bushveld mines increased as greater production from underground operations led to an improvement in head grades. Lonmin also gained a small volume of pgm output from the Messina mine on the eastern limb of the Bushveld complex, which it acquired in June 2005.

Northamís platinum production climbed to 225,000 oz, up 18 per cent on the previous year when the mine lost six weeksí output due to a fire. In addition, new technology at the companyís UG2 concentrator contributed to an improvement in recoveries.

Aquarius Platinumís Kroondal and Marikana mines are both now operated under Pool & Share Agreements with Anglo Platinum. Platinum output attributable to Aquarius from the two operations in 2005 totalled just over 200,000 oz. The concentrator at the companyís newest mine at Everest South was commissioned during December.

Platinum output from the Modikwa joint venture between Anglo Platinum and African Rainbow Minerals increased by 13 per cent to 129,000 oz, whilst the concentrator at the Crocodile River operations of Barplats was refurbished during the year.

Russian sales of platinum increased by 5 per cent to 890,000 oz in 2005. Norilsk Nickel was able to release details of its pgm output for the first time Ė the company produced 751,000 oz of platinum during the year, with output in the second half boosted by a reduction in pipeline stocks of pgm. Production from the alluvial mines in the Far East of Russia was relatively stable, whilst there was no evidence of sales by either the Ministry of Finance or the Central Bank.

Supplies of platinum from North America declined by almost 7 per cent to 360,000 oz in 2005. Sales of re? ned platinum by Stillwater Mining increased, despite a slight decline in average grades at its mining operations in Montana, but this was offset by lower output at Inco, Falconbridge and North American Palladium.

Production of platinum in Zimbabwe grew to 153,000 oz, up by 10,000 oz on the previous year as a result of increased output at both the Mimosa and Ngezi mines.

Platinum Demand

Demand for platinum reached 6.7 million oz in 2005, an annual rise of 160,000 oz. Purchases by the autocatalyst sector again grew strongly, and use of the metal in the glass industry and electrical applications also increased. However, jewellery demand for platinum fell for the third year in a row, a direct result of the rising price. Supplies of platinum expanded at a similar rate to demand, and so the market remained in deficit.

Purchases of platinum for use in autocatalysts surged by 330,000 oz (9 per cent) to a new high of 3.82 million oz in 2005. Most of the growth occurred in Europe as a result of tightening limits on diesel emissions, strong demand for catalysed soot filters (CSF), and further growth in diesel car sales. Rising production of light vehicles in China and elsewhere in Asia also boosted demand for platinum.

In contrast, purchases of platinum for jewellery manufacture dropped by 200,000 oz to 1.96 million oz, the weakest level of demand in a decade. A further sharp drop in purchases of metal by the Chinese jewellery trade accounted for much of the decline but demand in Japan and North America also contracted. In all regions, purchases of platinum for jewellery were adversely affected by the strength of the metalís price. The high cost of maintaining inventories of platinum jewellery prompted wholesalers and retailers to cut stock levels and led to an increase in the volume of older pieces being recycled to manufacturers.

Industrial demand for platinum climbed by 9 per cent to 1.675 million oz last year, an all time high. In the electrical sector there was further growth in the use of platinum in hard disks, whilst the ongoing expansion of LCD glass manufacturing capacity in Asia propelled glass demand for platinum to a record level. Consumption of platinum in the manufacture of catalysts for the chemicals and petroleum refining industries also increased.

Net demand for physical investment products in platinum slipped lower in 2005. Sales of bullion and proof coins were relatively stable but Japanese investors were net sellers of large bars, reflecting the move in the price through the key level of 3,000 yen per gram around the middle of the year and its rapid rally towards 4,000 yen per gram during December.

Price of Platinum

The price of platinum was relatively stable during the first half of 2005, trading between $860 and $880 for much of that period. In contrast, the second half of the year was marked by an increase in volatility and a strong rally, as a substantial influx of fund money propelled platinum to $1,012 in December Ė the highest price for almost 25 years.

Source - Johnson Matthey

The Economic Articles

Economic Indicators