Platinum demand will not be hard hit by the effects of last week's earthquake and tsunami, Johnson Matthey has said.

The chemicals company believes the impact of the disaster on the precious metal, used for several key components in the automotive industry, will only be temporary. Palladium, also used to make cars, may take more of hit, however.

It comes in the aftermath of the 8.9 magnitude earthquake in Japan, which has resulted in the country's manufacturing sector temporarily closing down.

Car makers including Toyota, Nissan and Honda have reported that output will fall as they shut factories and black-outs affect production.

Japan accounts for 15 per cent of global platinum demand and 16 per cent of worldwide palladium consumption.

Prices of both metals have fallen in the wake of the disaster, with platinum losing six per cent and palladium now eight per cent cheaper than before the earthquake.

"Over the year, and generally, we don't really see why this should affect the platinum market in terms of fundamental supply and demand," said Jeremy Coombes, general manager for marketing at Johnson Matthey.

Palladium and platinum had been trading at high levels, with investors expecting automotive demand to increase.

Mr Coombes said the metals have experienced the same ups and downs over the last month, but Japan being a "gasoline market" brings palladium "more in focus".

"Perhaps this is why investors ... might say palladium is more vulnerable to the stoppages and interruptions of output, not only in autocatalysts but also in electronics as palladium is very strong in these electronic components," he explained.

Despite the drop in prices, Mr Coombes is confident that demand for the metals will pick up and the effect of the Japan disaster will not be long lasting.

In addition, the marketing manager reckons that growing demand from the likes of China for cars, flat screen TVs and the thin LCD glass for hand-held computers will help the recovery.

"I don't see this changing the supply/demand fundamentals at all, the biggest impact has been, and is likely at the end of it all, to have been on the price," he said.

In terms of jewellery, Mr Coombes thinks the demand for platinum may take more time to recover as this is more dependent on sentiment, though some investors may want to seek to put money into metals as an alternative to stocks, bonds and currencies.

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JM says palladium more vulnerable after Japan quake (16/03/11) 

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