Investec Asset Management believes autocatalyst demand for platinum metal will increase this year, despite the strong oil price that could have a lagged effect on diesel vehicle sales.
Analyst Cara Geffen told Mineweb today there was no evidence yet of a slowdown in demand for autocatalysts or metal for autocatalysts resulting from lower demand for vehicles as the oil price hovers around $130 a barrel.
This comes as higher demand for vehicles in the East, in particular India and China, is exceeding a reduction in demand for vehicles in the United States and Europe.
We still expect to see growth in autocatalyst demand out of the East, Geffen said.
Investec would not make a platinum price forecast for the next months of 2008, but the institution has noted that the Chinese come back into the market at a price of $1800/ounce and that real buying into the market occurred at this level.
The analyst said they were bullish on the platinum price as it was driven by legislation in the United States and Europe that is increasingly trying to deal with vehicle emissions.
The oil price effect on platinum was quite far down the track as legislation enforced the use of platinum autocatalysts, which were not employed to curb carbon dioxide emissions only.
Geffen said there have been no further announcements of supply problems by producers over the past weeks and described the demand side of the platinum market as less black and white.
However, Investec was positive on the price as the platinum market would remain in deficit this year.
The palladium price was expected to remain at current levels as long as the platinum price remained high. Although the supply demand balance was improving in support of the palladium price, there was a huge amount of above ground palladium stocks that could provide a constant feed of metal to the market.
If the palladium price reaches too high, those that are sitting on the metal will sell it off, she said.
Palladium was also produced as a byproduct of platinum and nickel, which implied that increased supply of palladium to the market was not always met by demand growth.
The price differential between platinum and palladium was currently at an all-time high, but platinum could only be substituted in gasoline autocatalysts and not in autocatalysts for diesel vehicles.
If platinum holds at high levels, the palladium price will remain in the same band over the next six to eight months, Geffen said.