Investment on platinum metals to remain healthy
2009-07-01 15:00:00
NEW YORK: Commodities market research, consulting, asset management and investment-banking firm CPM has forecast that the three major platinum group metals (PGMs) are expected to remain as dynamic this year as they have been for the past 18 months.
Fundamentals for the platinum market seem to favor platinum prices as investment demand is forecast to remain healthy as mine supply is expected to remain a concern, the CPM Group said.
In their annual CPM Platinum Group Metals Yearbook 2009, CPM analysts suggested, “Many of the present concerns faced by the South African platinum industry are not expected to be resolved any time soon”.
“Many of the problems associated with mining in South Africa, such as power shortages, a shortfall of skilled labor, and safety related issues are expected to remain unresolved at least during the medium term.”
Fabrication demand, which comes mainly from the auto catalyst sector, is expected to rise as the world creeps out of the present recession, CPM said. Nevertheless, the analysts warned of an increased threat to platinum use in catalysts from the substitution by palladium.
Another recent threat for all three PGMs used in autocatalysts is the use of nanotechnology. However, only two automakers, Nissan and Mazda, are employing this technology on one car model each. Other automakers would have to weigh the costs of acquiring and adapting the technology against cost savings. CPM noted that the technology has no on-road performance track record, which could discourage other automakers.
Despite the decline of fabrication demand, CPM believes investor interest in the metal is expected to rise. Several factors have contributed to increased investor interest including: the growing interest in the investing community about commodities as an asset class; the introduction of exchanged traded funds; the safe haven attributes of platinum; and the expectation that platinum demand will rise when the global economy improves.
“In recent months, since the global economy began to deteriorate at a rapid pace, investors have been piling into platinum because of its safe haven attributes,” CPM said. “There also has been increased expectation among investors that the price of the metal will rise sharply when the auto sector begins to improve, making it a compelling investment at present prices which are relatively weak.”
Platinum output from the United States, Canada and Russia is expected to decline this year, largely as a result of shutdown and bigger cutbacks in platinum production, CPM advised. The analysts forecast 4,776,000 ounces of platinum production this year for South Africa, down from 4,859,000 million last year.
Canada is forecast to produce 208,000 ounces of platinum in 2009, down from 235,000 ounces in 2008, while the U.S. is predicted to produce 119,000 platinum ounces this year, down slight from 120,000 ounces in 2008. Total global platinum production is predicted to be 5,349,000 ounces this year, a 2% decline from 5,459,000 ounces in 2008.
CPM projects that total palladium supply will decline 6.7% to 7.5 million ounces this year. South African palladium output is projected to decline again this year as Canadian output is expected to fall sharply due to the Lac Des Ile mine being placed on care and maintenance.
Meanwhile, Russia's palladium exports could fall to 2.6 million ounces this year. This year’s palladium market surplus is also projected to decline to 304,000 ounces. The surplus decline is due to total palladium supply declining more rapidly than total fabrication demand.
CPM also suggests total palladium fabrication demand this year could decline 4.7% to 7.33 million ounces. Nevertheless, CPM forecasts that investors are expected to further increase their palladium holdings, despite the current weak industrial demand.
"Despite current weak fundamentals for the palladium market, they may pick up toward the end of this year as most forecasts point toward an economic recovery by early 2010," the analysts advised. "Investment demand should increase, fabrication demand may increase as well, and concerns over mine production are expected to remain."
Total rhodium supply is expected to total 885,186 ounces this year, down 3.1% from last year.
Fabrication demand, which declined 6% to 1,011,000 ounces during 2008, is expected to drag the demand for rhodium even lower this year, CPM forecasts.
(Source Mineweb)
