Platinum will slip further
Nov 22, 2012
In August, striking workers “began to paralyse” the platinum-mining industry in South Africa, which accounts for around 75% of global supply, says Laura Clarke in The Wall Street Journal. Most thought the disruption would soon pass, but the stand off has continued to crimp output. By September, South African production was 8.3% down on a year earlier.
Analysts have revised their supply forecasts: they now expect a slight deficit this year, rather than a surplus, which has bumped up their price forecasts.
But while problems in South Africa raise the price floor for platinum, forecasts still look too optimistic, says Capital Economics. The metal, now priced at around $1,580 an ounce, is unlikely to average $1,700 next year as analysts expect.
The key to platinum demand is the state of global manufacturing; the metal is a key component of catalytic converters for cars. The global economy looks lacklustre and growth prospects are worst in the economies where platinum use is highest: Europe and Japan.
These two regions comprised 43% of demand last year; China, a mere 25%. Platinum is set to keep losing market share to cheaper substitute palladium. The upshot is that platinum is likely to average less then $1,500 in the first half of next year.