platinum in high demand short supply

Platinum May Reach Record on Auto Demand, Antaike Analyst Says

By Xiao Yu

Feb. 27 (Bloomberg) -- Platinum may rise to a record this year as automobile makers use more of the metal in diesel vehicles and Chinese demand grows, an analyst at Beijing Antaike Information Development Co. said.

The price of platinum for immediate delivery may reach $1,500 an ounce, Jin Xiangyun said in a report e-mailed to Bloomberg yesterday. Platinum, which reached a record $1,402.50 an ounce on Nov. 21, traded at $1,233 an ounce at 11:58 a.m. Beijing time, according to Bloomberg data.

China's economy has grown by an average 9 percent a year in the past decade, making car ownership affordable for more people. General Motors, Volkswagen AG and others sold 25 percent more vehicles in China last year, as sales in the country surpassed Japan's for the first time.

``The market share of diesel vehicles will grow rapidly as more rigid standards for emissions are in place or are to be implemented worldwide on environmental concerns,'' said Jin, who has been following the industry since 2001.

Platinum is used in catalytic converters to reduce emissions from diesel vehicles. High oil prices have prompted automakers in Europe and the U.S. to produce more trucks and lighter vehicles using diesel, a cheaper alternative to gasoline.

China's vehicle sales will likely rise 18 percent this year as economic growth boosts demand in the world's second-biggest automobile market, the China Association of Automobile Manufacturers said Jan. 22.

Growing Demand

Platinum used in cars produced in China rose 58 percent last year to 151,000 ounces, compared with 2005, according to Antaike, the research affiliate of China Nonferrous Metals Industry Association, a government body. The industry has the biggest share of growth in platinum consumption. Platinum is also used in jewelry and in the fiberglass industry.

Brussels-based Umicore SA., the world's largest precious- metals recycler, and others have built plants in China to benefit from low production costs and rising demand in the Asian country.

While demand keeps growing, global mine production will be restrained in South Africa, the world's biggest producer of platinum. ``Mine production expansion in South Africa may be halted due to a stronger rand. A significant increase of global supply won't be seen until 2008,'' Jin said.

Global demand for platinum exceeded supply by 20,000 ounces in 2006, according to London-based Johnson Matthey Plc., the world's second-biggest producer of catalysts.

Still, platinum jewelry demand in China may continue to fall as high prices deter buyers, Antaike said.

Platinum prices may average $1,200 an ounce this year, Jin said in the report. Price of the precious metal averaged $1,142 last year, according to Bloomberg data.

-- Editor: Killen

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To contact the reporter for this story: Xiao Yu in Beijing at [email protected]

Last Updated: February 26, 2007 23:17 EST