The global financial-crisis-battered platinum market would have been in worse shape at the end of last year had it not been for scrap, market analysis company GFMS reports.
GFMS CEO Paul Walker says that the massive scrapping of old jewellery “saved the sector from crashing completely”.
Walker explains that, towards the end of 2008, there was a growing trend to convert old platinum jewellery into scrap to take advantage of a buoyant platinum price.
“In 2008, 400 000 oz of old platinum jewellery was converted into scrap. [Much] of this movement came out of China and Japan, where the market is conducive to the metal coming back into the sector,” says Walker, adding that studies conducted by GFMS indicate that China is currently the biggest consumer of platinum jewellery.
The massive recycling of plati- num jewellery offset the poor showing by South African and Russian mines. South African mine production dropped by over 400 000 oz.
Looking ahead, Walker reports that platinum should trade between $900/oz and $1 400/oz.
“Declining automotive demand will pull the price down; however, this will be counteracted by an increase in retail investment and the demand for exchange-traded funds. South African production should be on the decline for another year, which will have a big impact on the market. “However, this will be offset by another year of scrap mobilisation,” says Walker.
He adds that, in a market that is hugely volatile, the performance of the retail investment sector will be the joker in the pack.
“If the retail investment sector continues circulating between 500 000 oz and 700 000 oz, the price will be pushed up significantly,” concludes Walker.
To watch a video in which PAUL WALKER Precious metals in general will continue to attract investors in 2009, click here.