JOHANNESBURG (miningweekly.com) – Positive supply fundamentals and continued global economic growth could push platinum as high as $2 000/oz this year, with gross demand for the metal increasing by 16% to 7,8-million ounces, researcher Johnson Matthey said in its ‘Platinum 2011’ survey released on Monday.

Growth in automotive and industrial demand, with limited expansions in supplies, was the driving force behind the platinum price, which averaged at $1 762/oz during the six months to the end of April.

Johnson Matthey is forecasting an average platinum price of $1 870 oz for the next six months.

If interest rates in key markets remain low, speculative investment interest would also support the higher price of platinum. External shocks, such as an increase in the price of oil or negative sentiment surrounding sovereign debt could once again prove to “be a drag” on the price. However, strong physical buying in China was likely to give support during price dips, which meant platinum would not fall below $1 750/oz, the survey stated.

Precious metals consultancy GFMS said in its ‘Platinum and Palladium survey’ earlier this month that platinum could be “comfortably north” of $1 900/oz by year-end.

Global platinum supplies increased by 0,6% to 6,06-million ounces in 2010, while recycling climbed to 1,84-million ounces.

Johnson Matthey said that stimulated by low interest rates and a positive outlook for supply-demand fundamentals, net physical investment demand for platinum remained robust in 2010 at 650 000 oz, with investors buying into newly-launched physically backed platinum exchange-traded fund in North America.

RECORD DEMAND FOR PALLADIUM

Palladium would average at $825/oz over the next six months, while gross demand increased by 23% to reach a record high of 9,63-million ounces last year, the survey indicated.

Demand was attributed to strong purchasing by the automotive and physical investment sectors. Strong fundamentals would continue to support the price of palladium at between $715/oz and $975/oz over this period.

Supply for palladium is expected to decline this year, with lower sales from Russian State stocks offsetting an increase. Supply of palladium from Russian mining increased by 2%, while sales of palladium from these stocks were about one-million ounces.

“Demand in the automotive and industrial sectors is expected to continue to grow this year. If there is no repeat of the exceptional levels of physical investment demand for palladium as in 2010, the market is likely to be in deficit again,” the survey said.

This is also echoed by GFMS which stated that the metal, which was increasingly being used as a substitute for platinum – would descend into a “large” deficit.

Gross palladium demand for in the jewellery sector fell by 20% to 620 000 oz, while for platinum, purchasing decreased by 14% to 2,42-million ounces.
 

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