analysis on platinum from report out today

Platinum: SGE sales surge suggests strong physical Chinese demand
? Sales of platinum on the Shanghai gold exchange jumped sharply following the return to trading after holidays, posting the fourth-highest daily sales since 2009. This, combined with solid turnover in March, suggests that end demand for jewellery (and perhaps some industrial applications) is strong, especially in the context of the apparent stock build during the price crash in September
last year.
? Stronger Chinese buying activity is bullish for platinum at current levels in the absence of other
news. That said, poor news from Europe is a problem, as this largely shapes sentiment toward
platinum thanks to the metal?s exposure to European auto markets. This appears to be an
increasing risk, with Spanish debt markets shaky and signs of pressure on the Swiss/Euro cross,
but we still remain bullish, however, given the positive picture from China and weakness in supply.

Shanghai gold exchange turnover can be interpreted as a sale, as it is effectively a one-way
transaction between the Chinese Platinum Corporation and jewellers and other manufacturers,
who cannot trade metal back onto the exchange. It does not account for all of Chinese
consumption, as there is other metal making its way across borders, but it does provide a time
guide to apparent demand.
? We have often seen strong China buying on dips in the past, most noticeably during the crash in
prices in September. It is notable that prices did not fall particularly far to induce yesterday?s
buying, suggesting Chinese fabricators of platinum products are willing buyers when prices fall
toward $1,600oz.
? While SGE sales YTD are not particularly strong compared to the same time last year, this needs
to be put in context with the surge in buying in September, which largely represent a stock build
ahead of an anticipated increase in end demand. With SGE sales now punching higher, it
suggests jewellers are comfortable about stock levels, which likely reflects the strength of end
demand.
? This means we should expect stronger Chinese consumption in 2012, or perhaps a revision to
2011 data. In the last Platinum Review, Johnson Matthey estimated 2011 gross consumption
growth at 35koz, suggesting the jump in SGE purchases went into stocks. The recent bounce in
SGE sales suggests this number could be revised higher or that jewellery consumption in 2012
will be markedly higher than the gross 1,685koz estimated for 2011.