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Upbeat On Platinum, Palladium Price Outlook
By Charlotte Mathews

05 Aug 2008 at 06:15 AM GMT-04:00

Supply shortages occasioned by power outages have been a factor.

http://www.resourceinvestor.com/pebble.asp?relid=45039

JOHANNESBURG (Business Day) -- Platinum and palladium prices could recover later this year because supply shortages related to the national power crisis are likely to go on, Natixis Commodity Markets said in its third-quarter Metals Review released yesterday.

Spot platinum plunged almost 5% to $1,578/oz in early trade yesterday, its lowest level in six months, on the release of figures from the U.S. and Germany showing a sharp fall in vehicle sales, said Bloomberg.

The price of platinum, which is used in catalytic converters in vehicles, has shed almost 20% in three weeks. South Africa (SA) produces most of the world’s platinum.

Angloplat, the world’s biggest producer, was 4% weaker at R877 by mid-afternoon, while Impala Platinum, the second-biggest producer, was 6% down at R202.60.

However, Natixis was bullish on the outlook for precious metals generally. It said they should benefit from safe haven buying amid the turmoil on financial markets. The threat of military activity in the Middle East, resulting from Iran’s nuclear ambitions, could also accelerate investor activity, it said.

The gold price should average $940/oz this year but it was likely to drop to an average of $850/oz next year as US short-term interest rates rose, the dollar strengthened and fears of inflation waned.

Platinum would average $1,970/oz this year but climb to $2,250/oz next year on tight stocks, as well as the likelihood that output problems related to SA’s power shortage had not yet been resolved. Natixis was less bullish on the palladium price outlook, which it expected to average $450/oz this year and next year, curbed by quantities held in Russian stockpiles. On base metals, Natixis expected prices would continue to fall. Tight supply had maintained prices so far but output growth would start to accelerate. While supply was easing, demand was falling, especially for metals linked to residential building activity such as aluminium extrusions and copper tube.

As the global economic downturn spread to the nonresidential sector and the motor industry was also being affected, demand for other products was declining. Natixis expected copper would average $8250/ton this year and $7250/ton next year as the market surplus grew. Lead could fall to $1,750/ton next year from $2000/ton this year and nickel to $21,000/ton from $24,600.

Demand for steel was still strong in markets such as the Middle East, Brazil, Russia, India and China, but was easing elsewhere and steel prices would come under further pressure this year and next.