reuters article

* Itochu sees demand for platinum outstripping supply from around 2017

By Yuko Inoue

TOKYO, May 16 (Reuters) - Japan's trading houses are targeting deals to secure platinum and palladium supplies to meet expected shortages later this decade, when tighter rules on auto pollutants and higher car sales boost demand for the metals used in autocatalysts.

Mitsubishi Corp, Japan's biggest trading company and one of the world's top precious metals traders, and Itochu Corp, the country's No.2 trading company, are both in the final stages of feasibility studies on mining projects in Canada and South Africa, respectively.

While Itochu and its partner Ivanplats have yet to announce platinum production plans, Mitsubishi has secured offtake rights for 200,000 ounces a year of mostly palladium from 2016 in order to hedge against market volatility and supply shortages.

"There are no viable substitute materials for autocatalysts, and the trend in demand is certainly up in the mid-term," Kenjiro Fujimoto, deputy general manager at Mitsubishi, said in an interview.

Itochu expects global demand for platinum used in catalytic converters in diesel vehicles to surge 50-90 percent by 2020, depending on the pace of the adoption of tighter auto emissions rules in China and India, up from 3.22 million ounces in 2010.

European countries are expected to introduce a stringent Euro 6 emissions standard targeted at diesel-engine powered vehicles in 2014 and 2015.

"Our projection is that demand for platinum will outstrip supply from around 2017 and the market will experience a big supply shortage in 2020 due to strong demand from automakers," said Satoshi Kondo, chief executive at Itochu Mineral Resources Development Corp, a unit of Itochu.

"Our South African project will be the biggest new supply source for primary platinum by then," he said.

Itochu last year joined Ivanhoe Nickel and Platinum Ltd's (Ivanplats) Platreef platinum and nickel project in South Africa, taking a 8 percent of the potentially big project for 22.4 billion yen ($280.4 million)

Unlisted Ivanplants is expected to go public mid-year and raise about $1 billion.

Itochu expects to avoid difficulties with labour and safety issues thanks to the mine's wide tunnels near the surface, which will allow them to use machinery and enhance safety, Kondo said.

South Africa accounts for 70 percent of global platinum production but output is often hampered by power shortage, industrial unrest, safety issues and smelter difficulties.


AUTOCATALYST RECYCLING

Itochu and Ivanplats are expected to announce production plans later this year.

Itochu, which is beefing up its metals business, logged 140 billion yen in net profit from its iron ore and coal businesses in the year ended March 2012, nearly half of its total profit.

Mitsubishi in March bought 25 percent of Stillwater Canada Inc's Marathon platinum group metals project for $94.9 million.

The prospect of limited supply from autocatalyst recycling also pushed Mitsubishi to secure the asset, Isao Kano, Mitsubishi's general manager, said.

"We don't see a large increase in supply from recycling because gathering of used materials is a difficult and very costly process," Kano said.

The company plans to refine the metals in North America and sell them mostly in Japan, where it has a large precious metal processing affiliate.

Platinum was in a gross surplus of 735,000 ounces last year, based on new supply and current demand, as it has been more exposed to the downturn in Europe, home to the world's biggest diesel-powered car market, according to research company GFMS, a Reuters unit.

By contrast, palladium, which is used mainly in the catalysts of gasoline-fuelled vehicles, was in a gross deficit of 313,000 ounces last year, GFMS said. ($1 = 79.88 Japanese yen) (Editing by Ed Davies)





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