During 2009, a year that took a toll on the platinum market, significant jewellery demand from China and Japan kept the platinum industry afloat amid significant fears of a market crash.

Last month, Investec Asset Management reported that significant buying of platinum took place in China in 2009, which was up 105% on 2008 platinum sales figures, and in Japan, which was up by 464% on 2008 platinum sales figures. Although this seems beyond normal levels, Investec did acknowledge that this demand was not pure jewellery demand in the traditional sense but rather a hybrid of jewellery buying and investment demand.

Global precious metals consultancy GFMS CEO Paul Walker agreed and reported at the release of the company’s annual ‘Platinum and Palladium Survey’ that real jewellery growth in Japan grew by less then 10%. “When GFMS releases figures, such as jewellery growth, the company only takes into account the metal that was taken out of the ground, refined and produced into the end product. The company calculates investment demand separately,” said Walker. Even taking this figure into conside- ration, Walker cautioned that the Japanese growth figure reported by Investec was “excessively high”.

Investec also reported that, while the Asian market saw an increase, jewellery sales in Europe and North America depressed as the consumer luxury spending ability was curtailed by the global economic crisis. This trend continued into the first half of 2010.

During 2009, the platinum market was characterised by supply constraints from South Africa, which had a large influence on the platinum market, accounting for 78% of supply. These supply constraints were mainly driven by the energy crisis that rocked South African industry in 2008 and then the global financial crisis.

The question whether this would be the case again this year remained a mystery; however, Walker reported that there should not be supply constraints.

“Unless there is a major crisis to the extent of [the 2008] power crisis, the market should not experience supply constraints. The increased tariffs announced by Eskom might make producers more cautious; however, increased demand from the automotive sector would offset this,” said Walker. Undoubtedly, the success story in the palla- dium market was the increased new-vehicle sales in China, which sold 1,74-million new vehicles in March this year, setting a new record.

Growth of passenger car sales grew by 64% year-on-year, while commercial vehicle sales grew by 39% year- on-year. Walker reported that, with Chinese regulatory hurdles and diesel quality issues limiting the penetration of diesel into the passenger and light commercial vehicle market, the con- tinued growth of the Chinese car market resulted in implicit growth of petrol-powered vehicles, for which the autocatalysts were largely biased towards palladium over platinum.

Looking forward, Walker said that, although the platinum market would remain in surplus this year, it would not reach the levels experienced in 2008. He added that investor demand would be key to the performance of this market with a price high of $1 900/oz entirely possible.

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