JOHANNESBURG (miningweekly.com) – The platinum market would move to a small surplus this year, despite global demand rising to a four-year high of 8.08-million ounces, researcher Johnson Matthey said on Tuesday.

The market analyst said in its ‘Platinum 2011 interim review’ that the market would end the year in oversupply of 195 000 oz, as strong demand would be more than matched by a rise in primary supplies and higher levels of recycling.

“Growth in the primary supply of platinum is largely dependent on Zimbabwean and South African mines reaching production targets,” Johnson Matthey GM for marketing and publications Jeremy Coombes said.

Global platinum supply is expected to increase by 6% to 6.4-million ounces this year, with a modest 3% rise in platinum production to 4.78-million ounces expected from the world’s biggest producer, South Africa.

"The most production growth would come from outside South Africa, which suffered from poor productivity in the first half of the year, with platinum shipments from North America and Zimbabwe expected to rise this year," Johnson Matthey principal analyst Alison Cowley told Mining Weekly Online.

North American platinum production would rise to 360 000 oz from 200 000 oz in 2010 and Zimbabwe’s output could grow by 20% to 435 000 oz. Russia was expected to maintain flat production growth, producing 825 000 oz of platinum.

“We expect the demand for platinum to be about 8.08-million ounces during this year, with strong growth seen from the manufacturing of autocatalysts, especially in the heavy-duty machinery sector, as well as a record increase in demand for platinum in the industrial sector, particularly where it is used to make glass for electronics and increasingly, in petroleum refining,” Coombes said.

The analyst said the world economy looks set for a period of slower growth in 2012, with potentially lower consumption and potentially lower demand for platinum in industrial applications.

The demand for platinum to manufacture autocatalysts was expected to increase by 2.8% as the North American and European heavy diesel engines manufacturers ramp up production, owing to older fleets being replaced by modern engines, as tighter emissions legislation kick in. The Japanese auto manufacturing sector also rebounded to pre-earthquake levels recently, pulling platinum demand higher.

However, European platinum demand for use in light duty vehicles was expected to drop, owing to platinum increasingly being replaced by its sister metal, palladium.

Coombes also pointed to an emerging growth area for platinum-group metals, in the nonroad emissions control of power generators, agricultural machinery, construction equipment and even locomotive engines.

The demand for platinum in the chemicals and electronics sector was also expected to be strong, including in the fledgling global fuel-cell market, which was starting to gain momentum.

Meanwhile, the global demand for platinum in the jewellery industry was expected to be slightly higher than 2010 at 2.47-million ounces, with robust markets in China, the US and Japan, while demand in Europe was expected to decline.

Although the demand for investment in platinum exchange traded funds was also expected to decline, it would remain positive during the year.

“If the current gold price premium to platinum is maintained, it may spur further increases in platinum demand by jewellery manufacturers,” Coombes said.

Johnson Matthey expected platinum to trade at an average market price of $1 650/oz during the next six months, with $1 800/oz as its ceiling forecast price.

With supplies expected to remain largely flat, Coombes said that the market would remain in a small surplus in 2012.

Meanwhile, the palladium market was also expected to be in surplus, by as much as 725 000 oz during this year, owing to the Russian Ministry of Finance selling off State stocks. However, excluding the sale of the Russian stocks, the market was expected to be in balance, with growth in primary supplies equal to that of rising autocatalyst and industrial demand and weaker demand from the investment and jewellery sectors.

Palladium is expected to trade at about $650/oz during the next six months.
 

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