Markets Editor
A SUSTAINED recovery in the price of platinum is only likely towards the end of next year as the global economy starts to emerge from recession and demand — particularly from the car industry — improves.
However, analysts are at odds on how quickly platinum will recuperate from its steep fall this year. And it is unlikely to retrace to the record $2300/oz it traded at in March. The metal fixed in London at $817/oz yesterday.
Credit Suisse Group said yesterday it expected platinum to trade at $1370/oz next year and continue rising in 2010 and 2011 as producers cut output. It said the industry would have to cut production to stimulate a price recovery, as supply was likely to outpace demand till the end of next year.
“About 40% of producers are operating at a loss at current prices,” Credit Suisse said.
Wolfgang Wrzesniok-Roßbach, analyst at metals group Heraeus Metallhandels, said he expected platinum to average $945/oz next year and trade in a range of $1000- $1400 in 2010.
Although there might be further production cuts in the short term due to low prices, Wrzesniok-Roßbach said production would stabilise in the longer term as prices rose. Mines were likely to reduce their production relatively quickly to stay in line with demand, he said. Some had already cut back, primarily because a large part of the production was no longer economically feasible.
London-based investment house Fairfax expected platinum to average $900/oz next year, down from previous estimates of $1100/oz, because of lower car sales and the effect of sales by exchange-traded funds.
Wrzesniok-Roßbach said platinum had recovered strongly from the $759/oz it hit in late October following the firmer gold price and a stronger yen, which makes platinum cheaper for yen-based Japanese investors and jewellers. However, he said recent gains were short-lived due to the sorry state of the global car industry. Most recent figures were a “complete disaster” he said, with “not a single ray of hope”.
Spain, one of the most important European markets, reported a 50% fall in new registrations for November. Sales in England were down 37%, Italy reported a 30% drop, German sales fell 18% and French sales were 14% lower. In Japan, sales fell 18%, while Brazil’s sales were down 17%, sales in SA dropped 28% and US sales toppled 37%.
Sagging physical demand from the industry was being strongly felt by the market, Wrzesniok-Roßbach said, and a quick recovery of the platinum price did not appear to be on the cards.
