Analysts expect tight global platinum market to persist into 2009

Analysts are expecting the global platinum deficit to continue maintaining high prices into 2009, according to an informal poll by Reuters.
Author: Veronica Brown
Posted: Wednesday , 23 Jan 2008

LONDON, Jan 23 (Reuters) -

The world platinum market is expected to stay in deficit in 2008 and 2009, keeping prices pinned at lofty levels, as demand grows and output disruptions curb supply, analysts say.

An informal survey of analysts responding to Reuters precious metals price poll showed the market balance for platinum, used in jewellery and to clean vehicle exhaust fumes, at an average deficit of 181,500 ounces by the end of 2008, narrowing slightly to 175,000 in 2009.

Precious metals refiner Johnson Matthey said last November that the market would end 2007 in a deficit of 265,000 ounces after a 65,000 ounce surplus in 2006 snapped a seven-year chain of supply tightness.

"The very fragile and unstable equilibrium in the tight supply demand balance in platinum will remain a key concern and probably the underlying reason for several rallies in the course of the year," MKS finance analyst Frederic Panizzutti said.

Platinum prices ran to a record high of $1,590.50 per ounce earlier this month as speculative fervour for commoditiesrippled across precious metals -- also sending gold to a record $914 per ounce.

But once the froth subsides, analysts say the tight market conditions would be key in keeping the metal at the top of radar screens.

The head of steam in platinum had been building all year outside the wider investor arena, with output disruptions leading to higher lease -- or borrowing -- rates.

SUPPLY STRANGLED

Mine supply of platinum has been beset with supply problems due largely to mine closures and industrial action resulting from accidents in top global producer South Africa.

Almost a quarter of a million South African miners downed tools in December in a show of force aimed at breaking a cycle of mounting deaths in mines, disrupting output.

Before that, top producer Angloplat, majority-owned by mining group Anglo American Plc , scaled down its 2007 full-year refined platinum output to between 2.6 million to 2.65 million ounces, down from its previous estimate of 2.8 million to 2.9 million ounces.

Lonmin, the third biggest global producer had said its 2007 platinum sales fell 16 percent to 793,584 ounces from a restated 939,654 ounces in the previous year due partly to smelter problems.

Analysts said supply problems were far from over, with South African union officials having already expressed their willingness to strike again until safety concerns are addressed.

"The continuing safety drive by South African unions is likely to escalate in 2008, thereby contributing to an already challenged supply environment and an elevated platinum price," said Edel Tully, analyst at Mitsui Global Precious Metals.

With supply expected to remain tight, demand is showing no signs of slowing with resilient jewellery usage despite the high spot market price and firm oil prices likely to accelerate needs for autocatalysts to service diesel-powered cars.

"With oil challenging $100/barrel, platinum demand for autocatalysts will increase further, particularly if the currently untapped U.S. market begins to switch to diesel-powered cars and echo the trend already set in Europe," said James Moore, analyst at TheBullionDesk.com.

* For the main precious metals price poll, click on [PREC/POLL]

Summary of forecasts as follows:#

Surplus/deficit forecasts in ounces.

'08 '09

Mean -106,500.00 -127,833.33

Median -181,500.00 -175,000.00

highest 386,000.00 290,000.00

lowest -350,000.00 -430,000.00

(Additional reporting by Atul Prakash; Editing by Peter

Blackburn)