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By Jon A Nones

SEATTLE (ResourceInvestor.com): The VM Group reported on Tuesday that the platinum market will remain in a deficit of 360,800 ounces in 2008, although down from 412,400 ounces in 2007, as mine supply continues to fall thus offsetting any drop in demand foreseen in the automotive industry. Platinum prices will remain strong so long as supply remains tight.

The platinum market has suffered a supply shock due to the [South African] power crisis and, as one would expect, the platinum price has moved higher, said Jessica Cross, CEO of VMG.

Platinum futures for July delivery rose $48.50, or 2.4%, to $2,034.90 an ounce on the New York Mercantile Exchange today. The metal had fallen 1.9% in the past five sessions.

Platinum futures soared 34% in the first quarter and reached a record $2,308.80 an ounce on March 4. This was largely due to supply concerns stemming from a power shortage in South Africa, which supplies about 2/3 of the world s platinum.

According to the most recent figures by Statistics SA, the production of platinum group metals (PGMs) declined by 15.9% in February 2008. In January, South Africa s platinum output declined by 16% year on year.

In late January 2008, South African mines were forced to shut down temporarily before being granted just 50% of normal power capacity. Currently, many major mines are still limited to just 90% power. Eskom, the country s main power provider, has confirmed that it needs to see South Africans cut power demand by 10% for the next few years.

VM Group s fourth issue of The White Book, a bi annual analysis of global platinum group metals (PGM) fundamentals sponsored by Fortis Bank, examines the remarkable developments that have taken place recently in South Africa and the impact on platinum prices.

How high the price can go, and how sustainable platinum s gains are likely to be, will depend on how sensitive supply, demand and investment are to these much higher prices, said Cross.

VM Group expects platinum mine supply to be 6 million ounces in 2008, down from 6.6 million ounces at its peak in 2006 and 6.3 million ounces in 2007. Recycling volumes will continue to increase, however, with platinum autocatalyst and oil recycling expected to expand to 0.976 million ounces from 0.916 million ounces.

South African mine supply remains vulnerable to further power generating problems, although Eskom appears to have eased the situation temporarily. Mine supply from outside South Africa is constrained in the short term, although we are forecasting a rise in recycling volumes, said Cross.