22nd January 2010 TEXT SIZE Platinum researcher Johnson Matthey expects the platinum market to improve in 2010 and predicts that it could move into a modest deficit as the world economy improves.
Johnson Matthey director for precious metals marketing Mark Bedford said at the interim review conference, held in November 2009, that the state of the global economy remains key to the prospects for the platinum market in 2010.
Economic activity is slowly recovering but remains some way below the levels of early 2008. However, demand is expected to improve as industry returns to more normal buying patterns. The spate of destocking in almost every sector now seems to be essentially complete, allowing demand to start recovering in many areas, he said.
Bedford asserted that autocatalyst demand was returning. Vehicle sales are expected to be higher in 2010 than in 2009 but are not likely to challenge prerecession levels for several years.
The automakers have run down stocks of vehicles to low levels and manufacturing volumes now reflect sales patterns. With some countries already emerging from the recession, consumer confidence should improve gradually with vehicle purchases rising, stock levels stabilising and platinum demand strengthening, he added.
The market share of diesel vehicles in Europe is expected to rise in 2010. A temporary reduction in consumers willingness to spend drove a move to smaller cars and to cheaper petrol vehicles in 2009. However, as consumer confidence returns, the share of diesel vehicles is likely to recover back towards the 50% mark. While this would boost automotive platinum demand, it would be tempered by a continuing substitution of some of the platinum by palladium in the diesel sector.
The Johnson Matthey report predicted that the weight of plati-num recovered from spent catalytic converters would resume its growth in 2010. As the number of new vehicles bought increased, more old vehicles would find their way into the scrap market than in 2009.
Bedford further reported that the outlook for the physical investment sector was largely dependent on exchange-traded fund (ETF) investors.
While there was significant disinvestment from ETFs during late 2008, there has been substantial net investment in 2009, encouraged by a steadily rising price. The launch of a Japanese platinum ETF has had little impact on the market to date. However, the possible launch of a US-based ETF could be more significant. If this is approved, which currently seems likely, it could lead to several hundred thousand ounces of extra investment, he pointed out.
Jewellery demand seems likely to soften somewhat during 2010. The strong levels of platinum demand in China, during 2009, were partly owing to a high degree of stock building, which Johnson Matthey expects is unlikely to be repeated in 2010. Platinum had been successful in capturing market share from white gold, suggesting that the underlying demand should remain healthy in 2010. Bedford explained that, as Europe and North America emerged from the recession, jewellery industry demand for platinum should start to recover in each region.
Supplies of platinum are expected to grow in 2010. While many of the highest-cost shafts and mines in South Africa have been shut this year in response to low prices and a strong rand, Johnson Matthey does not expect much more rationalisation to take place. Increased production from some of the newer operations in South Africa and Zimbabwe, as well as a gradual recovery in supplies from some of the larger operations, should boost supplies.
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