Published: August 20 2008 16:17 | Last updated: August 20 2008 16:17
Recent negativity surrounding the outlook for the platinum price might have been overdone, argues Leon Esterhuizen, analyst at RBC Capital Markets.
“While the world economy is slowing – leading to lower auto and jewellery sales – and metal supply projected to expand, we believe this need not ultimately be bad for platinum group metals.”
Mr Esterhuizen believes demand will continue to grow. He notes that the diesel share of the Asian car market is expanding and sees sales of European diesel-electric hybrid car sales kicking in from 2009.
He acknowledges that a real risk lies with jewellery demand but says the recent drop in the platinum price should offer some support. He also does not expect to see the huge oversupply forecast by some observers.
“Supply dynamics are essentially a function of two things: restricted capacity of the majors to expand due to electricity shortages that will not be resolved anytime soon; and junior production being delayed.
“This exacerbates the capacity to find funding, compounding the potential for much lower actual supply than currently forecast. It also pushes larger producers to take out smaller but lower-cost rivals in order to swap high cost production for lower cost – not necessarily adding new production in the process.
“This leads us to cut our short-term outlook, but we increase our longer-term metal price forecasts in line with what we see as the absolute minimum required to get new production on line.”
MMB Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
