Platinum sales reach lowest levels in over a decade
A fall in platinum supplies has moved the market into a deficit of 400 000 ounces in 2012 as SA sales reach their lowest levels in over a decade.
"Platinum 2012", a Johnson Matthey interim review which was released on Tuesday, said supplies of platinum from South Africa are forecast to fall by 12% to 4.25-million ounces in 2012 – its lowest level since 2001 – as a result of safety stoppages, unprotected strikes, and the closure of some low margin operations. This has put pressure on the market for the present year and could continue to effect sales in 2013.
"The methodology didn't consider further stoppages in the fourth quarter," said Jonathan Butler, publications manager at Johnson Matthey. If strikes continue into the fourth quarter the deficit could be even larger and disruptions in December would inevitably affect sales in 2013.
Even before disruptions, platinum producers were looking to restructure, now some South African operations will come under close scrutiny and closures would also affect 2013 supply, Butler said.
With demand remaining firm at 8.07-million ounces and supply dropping by 10%, another notable reason for the deficit is less recycling which has been in response to lower platinum group metal prices throughout the year – that is until wildcat strikes flared up at Lonmin's Marikana mine and have persisted at Anglo American Platinum's Rustenburg operations.
"Platinum recovery from spent autocatalysts [a common application for platinum] is expected to fall by 16% to 1.034-million ounces," the review said.
Another aggravating factor is that Russia's platinum-containing ore continues to deplete. "We forecast that supplies of platinum from Russia will decline this year to 790 000 ounces [from 835 000 ounces in 2011]," the interim review said.
"We don't know what the Russians have, what we do know is that it is significantly less than they had 10 years ago," said Alison Cowley, principal marketing analyst at Johnson Matthey.
Platinum group metal supplies from North America are forecast to remain stable this year following a return to normal production in 2011.
The only growth has been seen in the "others" category said Butler. This includes Zimbabwe which recorded good results in the first half of 2012 as Zimplats and Mimosa continued to operate at full capacity, while Unki reached steady-state production a year ahead of schedule. "Platinum supplies from Zimbabwe are forecast to reach 360 000 ounces in 2012, 6% higher than last year," the review said.
Despite a decline of 14% in platinum demand for the European autocatalyst sector, the global sector has only declined by 1% as a result of growth in other regions like Japan and India.
And although there has been a 15% demand change in industrial applications, strong growth in non-road emission control has seen an upsurge in platinum demand.
Platinum jewellery had a strong year however with a 10% increase on 2011. This, Butler said, was largely owed to growth in retail stores and that lower prices may have encouraged Chinese jewellers to use the precious metal.
There was also some growth in this sector in Europe, where platinum was likely sold to consumers who may have ordinarily bought gold.
Johnson Matthey data on the purchasing trend for platinum jewellery in China has, however, reversed since the upsurge of strikes in South Africa which pushed prices up.
Investment in the metal is also thriving. "Investors are piling into the market on the back of supply concerns in South Africa," Butler explained. He said the Exchange Trade Fund market, which is physically backed by platinum, reached a record high of 1.6-million ounces in response to higher prices from the second half of August and through into September.
Johnson Matthey has forecast moderate growth in platinum demand in 2013. Incoming Euro 6 requirements for vehicles is also expected to be positive for demand. Supply concerns in South Africa could continue to push the price upward. Johnson Matthey expects the price to trade between $1 400 and $1 800 per ounce in the next six months.