Platinum Demand Growth Could Power Strong Performance In 2010

While gold attracted all the attention last year, platinum could be ready for a strong run in 2010. Demand for platinum is surging due to increased industrial activity …

While gold attracted all the attention last year, platinum could be ready for a strong run in 2010. Demand for platinum is surging due to increased industrial activity — most notably from the growing China auto market — which should lead to a better year for platinum. See the following article from Commodity Online for more on this.

What is in store for platinum group metals in the new fiscal year of 2010-11? Answer to this question is what most of the investors now want to know. If you take into consideration all the present and future trends, everything is going in favor of platinum group metals (PGMs).

According to market analysts, unlike 2009-10 fiscal, the new financial year will be the year of platinum group metals.

In the last fiscal, gold staged the biggest performance and scaled $1300 per ounce levels riding on the recession wave. But, since the world is recovering from the recession impact, this year is bound to be a great time for the PGMs.

In fact, everything is falling in place for the PGMs, considering the industrial recovery staged by the recession-hit nations. Take note of the following trends: US dollar still under threat, the competitive currency devaluation concerns, an eventual move toward a higher inflation environment, and improvements in jewelery and industrial demand as the world pulls out of recession.

The end to producer de-hedging, central bank net buying after a very long pause, and concerns that excessive US and European government debt may lead to future monetization are additional key drivers for the outlook.

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These are some of the factors which will help PGMs perform better than the previous fiscal.

And, to add to that world’s third largest platinum producer Lonmin has announced that its No. 1 furnace has been shut down after another incident at the troublesome smelter, with repairs expected to take over a month.

Lonmin has endured a number of safety difficulties in recent years and has often been forced to call upon the Pyromet furnaces, which have about 40 per cent of main furnace’s capacity. The latest problem at Number One comes despite the company rebuilding it last year.

This will certainly impact the platinum production in this year.

Demand rebound and sluggish supply are prompting PGMs and silver to outperform. Silver supplies were flat last year, platinum availability fell more than 10% and palladium supply declined 4%.

With demand for industrial silver rebounding sharply in 2010, likely around 19%, as global industrial activity and auto production move into recovery mode, supply/demand fundamentals look set to tighten materially in the new fiscal.

Given that platinum consumption is projected to jump about 8% in 2010 (auto catalyst consumption moving up some 9%) and palladium demand about 10% (auto catalyst consumption moving up some 20%), PGM supply/demand fundamentals are set to tighten materially as well.

Platinum has climbed 16 per cent this year and palladium has advanced 23 per cent, outperforming gold’s 2.8 per cent gain as investment and physical demand increased.

Passenger-car sales in China rose 55 per cent in February from a year earlier, while auto sales in the US were the fastest since the 2009 cash for clunkers program as the industry rebounded from the worst recession since World War II.

North American auto inventories are quite low and plants previously closed are reopening. Current demand for metal should be good as plants restock. This implies strong prices for industrial precious metals, placing them among top commodity picks.

In addition, given that silver and the PGMs behave like both precious and base metals, they should benefit from the strong gold market and the increase in industrial activity across the globe. As such they should outperform gold.

This article has been republished from Commodity Online. You can also view this article at
Commodity Online, a commodity news and analysis site.


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