Demand for platinum and palladium outstripped supply in 2012,
and both markets look set to remain in deficit in 2013, specialty
chemicals company Johnson Matthey PLC (JMAT.LN) said Monday.
In its annual market review, Johnson Matthey said gross demand
for platinum fell 0.6% to 8.045 million ounces in 2012, while
supply--hit by a series of labor strikes in South Africa's mining
sector--fell 13% to 5.64 million ounces. When accounting for other
supply and demand factors, such as additional supply of the metal
from recycling, the platinum market was left in a deficit of
375,000 ounces last year, Johnson Matthey said.
Gross demand for palladium, meanwhile, rose 15.6% to 9.895
million ounces, against an 11.1% drop in supply to 6.545 million
ounces. Overall, the palladium market registered a deficit of 1.07
million ounces.
Johnson Matthey expects platinum to trade in a range of $1,415 a
troy ounce to $1,710/oz over the next six months, averaging
$1,570/oz. Palladium should trade between $635/oz and $830/oz,
averaging $740/oz, it said.
The main driver of platinum's supply deficit last year was a
sharp drop in supply of the metal from top platinum producer South
Africa, where a series of violent mining strikes resulted in a
sharp drop in platinum production and the loss of 50 lives. Supply
of platinum from the country fell last year to its lowest level
since 2001, at 4.095 million ounces, as over 750,000 ounces of
platinum production was lost due to strikes, said Johnson
Matthey.
South African mining companies have been under pressure in
recent years from rapidly rising costs that made some mines
unprofitable. The threat of mine closures and related job losses
have led to strikes and government mediation.
Anglo American Platinum Ltd. (AMS.JO), the world's biggest
platinum producer, Friday said it is proposing to reduce annual
production by about 20% amid oversupply in the platinum market and
cut 6,000 jobs in a move to return to profitability within the next
two years.
This year, supply of platinum from South Africa is likely to
remain constrained, pressured by weak producer margins and unstable
labor relations at the country's mines, Johnson Matthey said. This,
combined with expectations for steady growth in investment demand
for the metal, should see the market register a slight deficit, it
said.
"This year's platinum market balance will come down to what
happens in supply and physical investment," Peter Duncan, general
manager of market research at Johnson Matthey told The Wall Street
Journal in an interview.
"Platinum's supply-side looks set for difficult times because
you've got these two [South African] unions battling for rivalry,
both wanting to show themselves to be strong," he said. "There's
certainly a recipe for trouble. And on top of that the South
African energy crisis seems to be peaking again."
On the demand side, physical investment in platinum looks likely
to remain solid this year, Mr. Duncan added.
The slight fall in platinum demand last year was driven by a
sharp drop in industrial usage of the metal--in the glass industry,
for instance--which fell 20.5% to 1.570 million ounces in 2012.
This outweighed a strong increase in platinum demand from the
jewelry sector, which rose 12.3% to 2.78 million ounces. Gross
demand for platinum in the autocatalyst sector--which accounts for
40% of overall demand for platinum, which is used in the catalysts
that scrub fumes from the exhaust of diesel-fueled vehicles--rose
1.7% to 3.24 million ounces, while investment demand for the metal
fell 1.1% to 455,000 ounces.
The supply shortfall in the palladium market, meanwhile, was
driven by record demand for the metal in the autocatalyst sector, a
major uptick in investment demand and lower supply of the metal to
the market. Demand for palladium in the auto sector--where the
metal is mainly used in autocatalysts in gasoline-fueled
vehicles--accounted for 67% of gross palladium demand last
year.
Gross demand for palladium in autocatalysts rose 7.5% in 2012 to
6.615 million ounces, while investment demand--driven by renewed
interest in palladium exchange-traded funds--swung into positive
territory at 470,000 ounces. In 2011, investment demand for
palladium was negative, with 565,000 ounces of the metal sold
overall.
Demand for palladium in the jewelry sector fell 11.9% to 445,000
ounces and industrial demand dropped 4.1% to 2.365 million
ounces.
Johnson Matthey expects the palladium market to remain in
deficit this year as sales of the metal from Russian state
stockpiles--which were built up during the Soviet era--dwindle and
autocatalyst demand continues to grow.
Write to Francesca Freeman at francesca.freeman@dowjones.com
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