Outlook for Platinum & Palladium markets 5th January 2004

Outlook for Platinum in 2004

• Supplies are expected to rise faster than growth in demand, leading to a continuing but substantially reduced market deficit.
• A recovery in Chinese platinum jewellery demand depends on industry profitability, which has been squeezed by rising spot prices, being restored.
• Autocatalyst demand should increase as emission regulations in Europe and Japan are tightened, although thrifting in the USA may offset this slightly.
• Industrial demand is forecast to be fairly stable.
• Supplies should increase substantially with all the major South African producers expanding production although the $/rand exchange rate is forcing a re-evaluation of some new projects. North American production of platinum should also improve.
• Fund activity is likely to continue to have a major, if unpredictable, influence on the platinum price in the short term, whether through additional buying of the metal or liquidation of existing long positions.

Outlook for Palladium in 2004

• Autocatalyst demand is expected to increase. Vehicles in Europe and Japan will require higher loadings to meet forthcoming tighter emissions legislation, whilst the proportion of new gasoline models using Pd-based catalysts will also grow.  Fresh purchasing is also expected in North America, as companies use less inventory metal.
• Further thrifting, miniaturization and substitution of palladium by nickel in MLCC will mean a drop in demand from the electronics industry.
• Russian supply is expected to be similar to mine output, as in 2003.
• As mine supply is forecast to rise faster than demand in 2004, the palladium market surplus will increase further.
• With the potential of long liquidation of fund positions, and the sale of metal from Russian government and other stocks also possible, little upside to the price is foreseen.