The platinum market is failing to focus on the positive, says Johnson Matthey principal market analyst Alison Cowley.
“We are in a situation at the moment in which people are focusing on all the negatives,” Cowley tells Mining Weekly in an exclusive interview.

It needs to be borne in mind that the struggling North Ameri-can autocatalyst market is “a relatively small consumer of platinum”, and that lower prices are proving “very positive” for jewellery.

In Europe, while auto production is declining in some markets, auto production is increasing in others.

Moreover, new European legislation coming in is going to mean that diesel particulate filters will be fitted to the majority of diesel vehicles in Europe next year, which is “significant” in that more than 50% of the European market is diesel, which will have a positive impact on demand.

“That’s not saying that demand is going to go up significantly, but what it is saying is that there is not, by any means, going to be a collapse in demand,” Cowley says.

Growth in the automotive markets is still expected in China, India and a number of other markets in the rest of the world.

“So, on the auto side, I wouldn’t say that we are optimistic and that we are going to see a big increase in platinum demand, but we are certainly not going to see the collapse that is being predicted in some quarters.”

On the jewellery side, there have been two “very good” months on the Shanghai gold exchange, which indicates that manufacturers in China are starting to build their stocks of manufactured pieces.

“Going into 2009, we would expect that to have a strong effect on consumer demand,” she adds.
On the industrial side, however, there is declining demand, owing to capital projects being delayed.

Supply
Cowley expects to see a small increase in supplies in South Africa in 2009.
The reason is that the new Smokey Hills, Pilanesberg and Blue Ridge mines will begin to contribute, along with several other mines that are already up and running, but still in the ramp-up phase.

Low prices are putting downward pressure on supply, rhodium prices having fallen “almost catastrophically” from $10 000/oz to $1 300/oz, which is significant to producers of platinum-group metals from upper group two reef.

John Matthey’s price forecast is $700/oz up to $1 400/oz over the next six moths, “which sounds very wide, except if you look at the last six moths”.

Low prices are beginning to cause operations to be closed, examples being Stillwater, in North America, and Limpopo, in South Africa, which are on care and maintenance, and projects to be deferred.

These supply-side reactions are likely to put upward pressure on prices.

In the long run, Cowley says, the platinum industry would like to see steadily rising prices above the current level, which for many mines is insufficient to cover costs.

If the rand were still at R7 to the dollar, the South African indus- try would be in dire straits, but at R10 to the dollar, much of the indus- try can cope with current prices.

“We do need higher prices, but I don’t think anyone would want to see, in the short to medium term, a return to $2 000/oz. I think most miners would be happy if the price were to return to $1 500/oz, which we saw at the end of 2007,” she says.

To see a video on Alison cowley's platinum viewpoint, click here.

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