The strong platinum prices and good prospects for the long term have contributed to the large number of junior miners that have entered the platinum mining market in South Africa, and resulted in increased exploration projects globally, speciality chemical company Johnson Matthey precious metals market analyst David Jollie tells Mining Weekly.

The rise in the number of platinum-miners in South Africa, as well as the increase in exploration projects on a global scale, however, will not have an immediate affect on current platinum-group metals market prices, owing to the time it takes for a new mining operation to reach production, reports Jollie.

“As a result of the timescale of opening a mine, which is essentially a number of years to get to full operation, this is unlikely to have a major impact on the price in the short term, despite new production by platinum-mining companies such as Platinum Australia, Platmin and Ridge Mining this year,” he explains.

Jollie says that platinum prices started moving around the middle of last year, and were influenced by a number of factors.

He says that the hike in the platinum price, which reached record levels in the final quarter of 2007, was influenced by the general strength of the commodity market.

The weakening of the US dollar and a strong oil price were the other contributing factors in the rising platinum price.
“At about that time, we also had a few strikes surrounding pay negotiations in South Africa, as well as short safety-related stoppages. So you had these things tightening the market, which was fairly tight anyway,” states Jollie.

Johnson Matthey reports that global demand for plati- num rose by 8,6%, to 7,03-mil-lion ounces in 2007, as a result of demand from the auto-catalyst sector.

In much of 2008 to date, the prices for the PGM industry have been in unknown ter-ritory, and that has had an effect on a number of market segments, says Jollie.

“There was already a wide price differential between platinum and palladium so end-users had already had plenty of incentive to change the metal they use if they could do that economically and technically. However, there has certainly been an impact on the investment market where a high price has made platinum more visible to investors. We have also seen recycling of platinum in a range of industries, including jewellery,” he explains.

Jewellery Decline
The jewellery market has been declining for four years in terms of the number of ounces sold to manufacturers, reports Johnson Matthey.

“In this market, there is a weakening demand, because price has gone up and that affects affordability. Also, we have second-hand jewellery coming back for recycling from Japan and China,” explains Jollie.

He says that because the metal is being returned for recycling, there is a sense that the market is healthier than the headline numbers suggest. “The market has performed to people’s expectations. The slowdown in jewellery demand has allowed the market to be more balanced, and has probably moderated the price movements as well, compared with what would otherwise have been the case,” comments Jollie.

Industrial Demand
Jewellery demand has dropped over the last few years in response to the platinum price hikes, but this has been out-weighed by a very strong growth in platinum use in the European diesel vehicle market and in the heavy-duty diesel sector.

The platinum price continues to be partly driven by demand from the autocatalyst sector, mentions Jollie.
Many industrial sectors have also been strong owing to fast global economic growth, he says.

“Platinum is used as a catalyst in the production of nitric acid, which is used in explosives and fertilisers. So demand from that application has been strong. “In the electronics sector, platinum content has been thrifted in computer hard disks, but this market continues to grow strongly, supporting demand for the metal,” says Jollie.

The challenges faced by the South African mining industry in meeting the global platinum demand, largely owing to the interruptions in electricity supply, are widely acknowledged in the platinum industry.

Safety shutdowns, geological and equipment problems, and a difficult labour environment all affected local platinum supplies, which dropped by 260 000 oz, to 5, 04-million oz in total for the 2007 production year.

Overall, the platinum market moved from a surplus of 355 000 oz in 2006, to a deficit of 480 000 oz in 2007, driving the price higher in 2007.

Jollie says that it is too early to tell where supply will be for the 2008 year as a whole.

“The bigger producers appear to have adapted reason-ably well to this challenge as well, although clearly their production is likely to be lower than they would have wanted,” comments Jollie.

Rhodium Thrifting
The record rhodium price has encouraged thrifting of the rhodium content in a typical automotive catalyst, which is the biggest application of the metal, reports Jollie.

Rhodium, however, remains important in controlling nitrogen oxide emissions in the autocatalyst industry.

“There is only a certain amount of engineering and system design that the car companies can undertake in order to decrease their rhodium use,” indicates Jollie.
He mentions that the price of rhodium has dropped by over a $1 000 in July, owing to the slowdown in the automotive market in the US.

Jollie adds that the drop in the rhodium price is also owing to the likely increase in rhodium production volumes coming out of South Africa in the second half of 2008.

“It is day-to-day availability that moves the rhodium price, much more than the platinum market,” he says.

The US automotive industry, over the last couple of months, has been struggling, but this does not mean that the current climate will persist over the course of the next year, states Jollie.

“I think that over the year, you can expect to see fairly positive automotive consump-tion, and not wildly exciting rhodium production figures, and this is as a result of the South African supply problems for platinum, palladium and rhodium,” he remarks.

Palladium Alternative
A favourable price ratio between platinum and palladium has encouraged auto-motive manufacturers to use palladium where possible in their catalytic converters for diesel and petrol engines, reports Johnson Matthey.
Jollie says that it is important to look at the two sides to the automotive market in the petrol and diesel catalysts.

“In [petrol] catalysts, it is typically feasible to use either platinum or palladium in combination with rhodium as the active catalytic materials. “At current price differentials between platinum and pal-ladium, it is attractive to use palladium in a large majority of [petrol] catalysts and automakers have replaced most platinum with palladium,” explains Jollie.

Platinum is still used in all catalysts in the diesel sector; however, some palladium can be introduced in the diesel sector as well, in order to reduce the overall cost of a catalyst.

Jollie says that a number of carmakers are, therefore, now introducing platinum and palladium diesel oxidation catalysts.

Johnson Matthey reports that autocatalyst demand for palladium rose by 10%, to 4,5-million ounces in 2007, which was the highest total since 2001.
Industrial demand for the metal was dominated by a thriving electronics sector, which took 1,29-million ounces in 2007.