AUTO OFFTAKE DRIVES PLATINUM DEMAND IN 2005 TO A NEW RECORD

JEWELLERY DEMAND IN CHINA NARROWS PALLADIUM MARKET SURPLUS

POSITIVE PRICE OUTLOOK FOR BOTH METALS

In Platinum 2005 Interim Review, published today, Johnson Matthey forecasts improved demand for platinum and palladium and a firm price outlook for both metals. Platinum demand will rise by 120,000 oz to 6.71 million oz this year, a new all-time high, exceeding mine supply for the seventh year in a row. Palladium demand will grow by 410,000 oz to 6.89 million oz, and with Russian supply expected to fall, the palladium market surplus will be greatly reduced.

PLATINUM demand from the auto sector will climb by 300,000 oz to 3.86 million oz, mainly due to growing demand for platinum autocatalysts for diesel cars and trucks in Europe, Japan and the USA. Demand for platinum in the manufacture of computer hard disks and LCD glass panels will boost industrial demand by 80,000 oz to 1.615 million oz. Jewellery demand, however, has been affected by the increased platinum price and will drop by 140,000 oz to 2.02 million oz. The bulk of the decline will take place in China.

Platinum supply will increase in 2005 by just 130,000 oz to 6.59 million oz. Output from South Africa will be lower than planned due to smelter problems at Anglo Platinum. The market is predicted to be in deficit by 120,000 oz and this supply shortfall will continue to support the price, which reached $941 in mid-October 2005.

Another large increase in purchases of platinum is expected from the auto industry in 2006 for catalysed particulate filters on diesel vehicles. The outlook for jewellery demand is less certain, but with fund interest in precious metals still high, we predict that the price of platinum could reach $1,030 during the next six months. It is unlikely to fall below $890 unless demand from jewellery manufacturers contracts more substantially than current trends suggest.

PALLADIUM demand from jewellery manufacturers in China will increase by 70 per cent in 2005, making jewellery, at 1.43 million oz, the second largest application for palladium. Apart from expanding use of palladium in plating applications in the electronics industry, demand in other sectors will be fairly stable.

Supply of palladium is projected to fall by 370,000 oz to 7.54 million oz due to a cut in shipments from Russia. This assumes that there will be no significant sales from central stocks before the end of the year. As a result there will be a market surplus of 650,000 oz, down from a revised estimate of 1.43 million oz in 2004.

Despite this surplus, the palladium price held above $180 for most of the first nine months of 2005, supported by the growth in jewellery offtake and by hedge fund interest. Palladium jewellery demand in China has the potential to increase further, while auto demand will rise as OEMs move from platinum to palladium catalysts for gasoline cars and light vehicle output expands in Asia. Meanwhile, the stock of Russian metal currently being sold by Stillwater will be exhausted in March 2006.

All these factors suggest healthier market conditions for palladium and a price in the range $190 to $270 for the next six months.

Platinum 2005 Interim Review is available free of charge in printed form on request from Johnson Matthey at the address below or can be viewed and downloaded in the Publications section. Photographs of platinum group metals applications and production can be downloaded from the Photo Library.

Johnson Matthey‘s main activities include the manufacture of autocatalysts, platinum process catalysts and speciality chemicals and the refining, fabrication and marketing of platinum group metals. For further information, visit www.matthey.com

Orchard Road, Royston, Hertfordshire, SG8 5HE, United Kingdom. Tel: +44(0)1763 256314 Fax: +44(0)1763 256339 Email: platinum@matthey.com