Interest in Vulcan should continue with latest platinum outlook
Platinum prices to remain strong on supply woes Mon 19 May 2008, 9:00 GMT
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By Atul Prakash
LONDON (Reuters) - Platinum prices are likely to be about 50 percent higher this year than in 2007, as production problems in South Africa and growing demand for autocatalysts boost the metal, a Reuters global poll showed on Monday.
The poll of 21 analysts and traders forecast a median 2008 price of $2,000 an ounce for platinum, used mainly in jewellery and to clean car exhaust fumes, and $2,100 in 2009.
The predicted figure for this year compares with the metal's average price of $1,304 in 2007 and is more than 30 percent higher than a similar poll conducted in January.
"While platinum was hit by a commodity-wide sell off in late April, the fundamental outlook is still strong," said Daniel Smith, metals analyst at Standard Chartered Bank.
"Platinum prices should find a floor soon and then trend higher into the middle part of this year on tight fundamentals."
Platinum hit a record of $2,290 an ounce in March following power cuts in South Africa that forced mines to shut for five days in January. Some mines in the country, which accounts for 80 percent of global output, are still operating below full electricity supply.
The metal slipped to a one-month low of $1,821 in early May before rising again to around $2,140 an ounce on Monday. Prices are still nearly 40 percent higher than at the start of 2008.
"On the supply side, the major risk remains South African mining production. The structural problems with power supply are not being resolved in the short run," said Peter Fertig, metals consultant at Dresdner Kleinwort investment bank.
Anglo American Plc , the world's fourth-biggest mining group, has reported weaker first-quarter output of platinum as it battles power cuts, strikes and floods.
"Out of our five precious metals covered, we remain most bullish for platinum. We believe that the metal can eclipse its record high of $2,290 and trade up to $2,500 this year," said Edel Tully, metals analyst at Mitsui Global Precious Metals.
HUGE MARKET DEFICIT
The market plunged into deficit last year, with demand surpassing supply by 203,000 ounces and was expected to remain in deficit this year due to production problems in South Africa, precious metals consultancy GFMS Ltd. said in a recent report.
"Demand for platinum is (not) expected to decline sharply, while uncertainty over supplies is unlikely to be removed," said Shuji Sugata, manager at Mitsubishi Corp Futures and Securities Ltd.
Platinum use in autocatalysts soared 135 percent in nearly a decade to 4.24 million ounces in 2007, mainly due to stringent emission norms and growing vehicle production. Analysts say the trend is likely to continue.
Platinum also got support from growing investment into exchange-traded funds. The metal held by Europe-based ETF Securities has doubled in four months to 356,000 ounces.
"Platinum and palladium have caught the attention of commodity funds attracted by limited above-ground inventory and a relatively price-insensitive consumption market in terms of vehicle emission catalysts," Nick Moore, commodity strategist at ABN-AMRO, said in a market report.
The poll showed an average price of $437.50 an ounce for palladium this year, up nearly 25 percent from last year's average. The poll also forecast an average of $450 for 2009.
Spot palladium was quoted around $448 an ounce on Monday, against a 6-1/2-year high of $590 hit in March.
"Investor enthusiasm for palladium is starting to fade, with weak fundamentals and a strengthening dollar giving the market very little in the way of support at present," said Smith of Standard Chartered Bank.
For a price forecast table, please double click on [ID:nL16730557]
(Additional reporting by Frank Tang in New York, Lewa Pardomuan in London, Lucy Hornby in Beijing and Chikafumi Hodo in Tokyo)
(Reporting by Atul Prakash; editing by Christopher Johnson)
