Johnson Matthey expects the platinum market to be in substantial deficit in 2008 as industrial and automotive demand is strong and supply from South Africa is set to underperform.
The firm said today the platinum price will trade between $1,775/ounce and $2,500/ounce over the next six months, although the global economic slowdown or any strengthening in the US dollar could cause it to weaken.
Johnson Matthey says the power supply crises in South Africa and temporary closure of Anglo Platinum's Amandelbult mine at the beginning of the year will affect this year's platinum production. They expect high volatility in the price to continue over the next six months.
The 2008 forecast comes as its 2007 review of the platinum industry found the market was in deficit of 480,000 ounces last year as production problems in South Africa drove supply 4.1% down to 6.55m ounces. Demand for platinum rose 8.6% to 7.03m ounces on the back of strong industrial and auto-sector demand. The price increased by 35% as a result.
Global platinum purchased by the autocatalyst sector rose by 8.2% to 4.23m ounces in 2007, as the number of diesel vehicles fitted with platinum-based exhaust aftertreatment in North America, Japan and Europe continued to increase. This outweighed the effect of substitution by palladium in some diesel and gasoline vehicles.
The jewellery's sector purchases of platinum fell only marginally to 1.59m ounces in 2007, despite the strong price. Chinese demand for manufacturing platinum jewellery rose modestly from 760,000ounces to 780.000 ounces.
Platinum investment demand climbed sharply from net disinvestment of 40,000 ounces in 2006 to 170,000 ounces in 2007 as two platinum-based exchange traded funds were launched in Europe. Industrial demand rose by 6% to 1.94m ounces as sales of electronic goods increased.
The palladium market is expected to again be in surplus in 2008, with the price trading at $575/ounce if gold and platinum performs well. The floor price is set at $400/ounce over the next six months.
The palladium market was in surplus of 1.75m ounces in 2007 as heavy selling of Russian state stock took supply to 8.59m ounces.