PLATINUM PRICE TO STAY FIRM IN 2003 AS MARKET TIGHTNESS PERSISTS. PALLADIUM PRICE TO REMAIN WEAK.

Platinum and Palladium demand and prices continued to move in opposite directions in 2002, according to Johnson Matthey (JM) in Platinum 2003, published on Monday 19th May 2003. The review projects that platinum price strength will continue in 2003 but that palladium prices will remain weak despite a recovery in demand. 

Demand for Platinum grew by 5% to a new high of 6.54 million oz (203.4 tonnes) in 2002, driven by another year of strong sales to the China jewellery market and by greater use in autocatalysts. Supplies of platinum failed to keep pace, rising by less than 2% to 5.97 million oz (185.7 tonnes). As a result the deficit between platinum supply and demand widened to 570,000 oz (17.7 tonnes). The platinum price responded by rising from $481 at the start of 2002 to $607 in December and on to a 23-year high of $705 in March 2003.

JM expects demand for platinum to flatten out or soften moderately in 2003, with demand from China for jewellery fabrication restrained by the firm price. South African mine expansions will continue, but the increased supply is unlikely to close the gap with demand. With physical availability of metal remaining tight, JM forecasts that platinum will trade between $590 and $690 for the rest of 2003.

Palladium demand slumped by 29% in 2002 to 4.78 million oz (148.7 tonnes), the lowest for 9 years. Auto industry purchases dropped dramatically due to substantial use of stocks by some automakers. Supplies of palladium slid by 28% to 5.25 million oz (163.3 tonnes) as Russian sales were cut to levels not seen since 1990. Despite this, the market remained in surplus and the price weakened from $440 in January to under $230 in December 2002.

Demand for palladium should improve in 2003 as auto industry stocks run down, leading to increased metal purchases. However, palladium output from South Africa will increase substantially due to the expansion of platinum mining, while sales from Russia are likely to exceed last year’s low. Consequently, palladium demand will continue to lag behind supply in 2003 and the market will remain in surplus. JM expects price weakness to persist with palladium trading between $120 and $180 during the next six months.

For further details contact platinum@matthey.com