medium term deficit

This should also help the price to rise for the next couple of years.

PLATINUM GROUP METALS
TIGHT SUPPLY
Platinum market moving towards deficit while palladium balanced
Supply side issues this year and next are likely to see the platinum market pushed back into deficit, while palladium is moving towards a balance on weaker Russian stock sales.

Author: Eric Onstad
Posted: Thursday , 30 Aug 2007

JOHANNESBURG (Reuters) -

Tight supply will push the platinum market back into deficit this year and palladium will be balanced due to lower Russian sales, the world's second biggest platinum producer Implats said on Thursday.

"We believe that supply side issues have become much more important this and next year and will result in the (platinum) market moving back into deficit," Marketing Executive Derek Engelbrecht told a results presentation.

The market saw marginal platinum surpluses in 2004 and 2005, but this grew to a surplus of 100,000 ounces last year, he said.

In 2007, weaker than expected production in South Africa -- which produces around three quarters of global platinum -- is expected to generate a market deficit of around 200,000 ounces, Engelbrecht said.

Top ranking Anglo Platinum Ltd cut its output forecast for this year due to labour and safety issues.

The firm, majority owned by mining group Anglo American Plc , said on July 30 full-year refined platinum production would come in at 2.6 million to 2.65 million ounces, down from a previous estimate of 2.8 million to 2.9 million ounces.

Third-ranking Lonmin Plc has also scaled back its output forecasts, saying on July 16 that sales for the year to Sept. 30 would be between 820,000 and 840,000 ounces of platinum instead of 980,000 to 1 million ounces.

Demand for platinum was still strong, with the main driver catalysts to clean pollution from auto exhaust. Although car sales have dipped in the United States and Canada, they remain strong in Asia and Russia, Engelbrecht said.

"It's becoming apparent that the rest of the world -- Asia, China, Russia -- are overtaking the West in terms of (car sales) growth."

A dip in the platinum price has also seen a pick-up in Chinese platinum demand for jewellery, which had taken a hard knock when prices surged by 50 percent over the past two years to more than $1,300 per ounce.

The price dippped to $1,218 per ounce after heavy liquidation of long positions on futures exchanges and was hovering around $1,265 per ounce on Thursday afternoon.

"In that environment, the Chinese have come back to the market very aggressively," Engelbrecht said.

LIGHT RUSSIAN SALES

In palladium, the market is expected to move to a largely balanced situation due to weaker stock sales by Russia, the largest producer.

The market is expected to show a marginal surplus of 50,000 ounces this year, down from a surplus of around 1.5 million ounces in 2006, Engelbrecht said.

Last year, Russia was estimated to have sold 2 million ounces of palladium stocks.

"In 2007, we don't believe the Russians are going to do that again... we have factored in a 1-million-ounce destock, leaving the market essentially in balance," Engelbrecht said.

"This number will be dependent on what the Russians do. If they don't destock, we can see for the first time a deficit... evidence to date suggests the Russians haven't yet destocked."