Eastern Platinum Ltd (ELR)

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Car sales halted, platinum future uncertain

2009-09-02 15:50:00

NEW YORK (Commodity Online): When car sales plumetted it affected several industries across the globe. One of them was the metals market. Among them platinum, which is used in making exhausts for the cars, has been hit hard by the slump in car sales.

Global car sales, especially in the US, had hit by the recession and companies like General Motors had applied for bankruptcy, which has affected several platinum and palladium producers.

And this lack of demand for vehicle catalyst material platinum could push the market into surplus this year even with the prospect of supply disruption from strike-hit mines in the South Africa.

Even though there were fears that the platinum production in South African mines will be hit, the prices refused to go up because the demand from the auto sector was down and the market feared that the metal will be surplus in supply in the market.

Platinum is also used in jewellery making but the demand for the platinum jewellery is limited in certain countries like Japan and China.

According to market watchers, rising stocks of the metal and weak car production were likely to keep prices in check unless industrial action proves persistent.

Net flows of platinum into Zurich — total imports minus total exports — from January to July this year amounted to almost 765000oz .

The platinum market had a deficit of 375000oz last year. But sharply lower demand from car makers was likely to have caused platinum stockpiles to rise this year.

With demand from car makers making up about half of global platinum consumption last year, the performance of the sector is vital for platinum. The favourable price of platinum sponge — primarily used by industrial buyers, whereas investors and jewellers usually buy platinum ingot — suggests industrial demand is still weak.

Prices have been supported by resurgent jewellery demand this year, especially from China, but this is unlikely to offset entirely falling demand from the vehicle sector.

The car industry suffered heavily from the economic downturn last year, with US car makers GM and Chrysler both filing for bankruptcy and Japan’s Toyota heading for a record loss this year.

Last week rumours were rife that Toyota could cut production by as many as 700000 cars, or 7% of global capacity.

The car industry has received some support this year from various cash for clunkers car scrappage schemes in the US, under which consumers are offered financial incentives to scrap old cars and replace them with new models.

http://www.commodityonline.com/news/Car-sales-halted-platinum-future-uncertain-20850-3-1.html