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JOHANNESBURG (miningweekly.com) – Although the platinum price is expected to average $1 170/oz this year, Thomson Reuters GFMS warns that it might test the $1 000/oz level during the year.
“The bearish view is based on the increase in supply, more specifically the estimated 22% rise in South Africa’s mine production and 10% rise in autocatalyst scrap that can increase total supply to 7.05-million ounces this year, 13% higher than in 2014,” it outlined in a report published on Thursday.
The ‘Platinum & Palladium Survey 2015’ pointed out that the platinum price had averaged $1 388/oz in 2014, the lowest yearly average in seven years.
“Intra-year, however, the drivers of price development in both halves were considerably different. While the rally in the first half was driven by severe supply shortfalls, during the second half of the year, the platinum price fell owing to a surging dollar and platinum’s strong positive correlation with gold,” the report said.
It noted that platinum prices had started 2014 constructively, influenced by the impending (and then actual) strike action in South Africa and the increasing tensions between Russia and the West.
Both developments were considered as critical factors that could disrupt the supply of platinum-group metals to the market and have a material impact on the price.
The five-month strike at South Africa’s platinum mines was estimated to cut 60% of supply from the region; however, as it fell short of this estimate, the market started repricing platinum’s value after the strike.
In effect, the total production from South Africa declined by 28.5%, the highest year-on-year fall recorded since 1999.
SUPPLY & DEMAND
Thomson Reuters GFMS expected global platinum and palladium supplies to rise this year, as South Africa’s “suppressed output level pushes back up towards a level of neutral buoyancy for its installed capacity and staffing levels”.
Platinum supply was expected to rise by 13% year-on-year and palladium by 5% year-on-year for 2015.
Demand for platinum would grow by an estimated 6% to 7.72-million ounces this year – an eight-year high – owing to growing demand from the autocatalyst and glass industries.
The market was expected to have a deficit of 670 000 oz, compared with the 1.02-million-ounce deficit in 2014.