16 November 2012

Zimbabwe: Global Platinum Supplies Plunge

The global platinum market is expected to suffer a 400 000 ounce deficit by the end of the year due to a substantial reduction in global production, an industry consultancy firm has said.

Last year the platinum market recorded a 735 000 surplus which was anticipated to persist into next year as production was expected to continue outweighing demand. But industrial action by workers in South Africa, the world's biggest platinum miner, has significantly lowered global output.

The world's biggest platinum mine in Rustenburg, owned by Impala Platinum, was hit by industrial action that halted operations for six weeks early this year costing the company at least 120 000 ounces in lost production.

Royal Bafokeng, hit by rising production costs, also came out saying that they were going back to the markets to raise more funds for its operations. In its platinum 2012 interim review released on Tuesday, precious metals consultancy firm Johnson Matthey said the global market would record a deficit.

"A substantial reduction in supplies, as well as lower volumes of auto catalyst recycling, will move the platinum market from surplus to deficit in 2012," it said.

"Severe disruption to mining is expected to reduce sales from South Africa and result in a 10 percent drop in worldwide platinum supplies to 5,84 million ounces."

Johnson Matthey said gross platinum demand was expected to remain firm at 8,07 million ounces, shifting the market into a deficit of 400 000 ounces.

It said platinum supplies from South Africa were expected to reach an all time low of 4,25 million ounces, a 12 percent decrease year on year.

"Output and sales of platinum from other producing regions will remain broadly flat," it reported.

Johnson Matthey said despite falling vehicle production in Europe, growing Japanese and Indian appetite for the white metal would see gross platinum demand in auto catalysts softening by 1 percent to 3,07 million ounces. Industrial demand for platinum is forecast to decline by 13 percent to 1,79 million ounces while physical investment demand for platinum is expected to remain firm at 490 000 ounces.

Going into next year, Johnson Matthey said gross demand was likely to grow marginally with steady auto catalyst demand and recovery in industrial purchasing.

The firm, however, noted that platinum recycling could play a key role in balancing the market next year due to uncertainties in supply from South Africa.

In 2010, global demand for platinum by the automobile sector stood at 2,985 million ounces, largely fuelled by China's rising needs. Global demand for the commodity has dipped over the years as effects of the global financial recession took hold on leading automobile industries who either closed shop or cut back on operations.

Platinum and its sister metal palladium are mostly used in motor vehicle catalytic converters and in jewellery manufacturing.

Zimbabwe has the world's second largest known deposits of platinum after South Africa.

Platinum accounts for about 36 percent of the country's total mineral production with at least 230 000 tonnes of the white metal having been exported in 2010.

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