MUMBAI (CommodityOnline): What is happening to the global platinum market? Are the declining car sales across the world hitting platinum demand and supply? Here is an analysis on how hot is platinum as a commodity, from Fortis Metals Monthly.
Platinum surged higher at the end of May, rising from $1,175/oz to a peak (on its London fix) of $1,275/oz on 10th June, the highest since September 2008. As with many commodities, renewed (if uncertainly based) economic optimism has
helped to firm prices; however, at just 6%, platinum's increase lagged that of base metals; the LMEX index gained 13% over the same period.
A worrying trend for platinum is the declining share in European markets of diesel-engine vehicles, which still predominantly use platinum rather than palladium catalysts. During January-April the share was 47.2%, down from 52.9% in 2008, and 53.6% in 2007.
The main reason for this has been a slump in Germany, which is also the market where car sales (thanks to incentives) are
currently performing best. So far this year just 31.5% of new cars sold in Germany have diesel engines, compared with 44.1% last year, a level not seen since 2000.
But the decline is more widespread than just Germany; diesel's share has also fallen in 12 of the 15 EU countries covered in data from ACEA (the European Automobile Manufacturers' Association).
So far, however, investors seem unconcerned by this shrinkage of the main industrial offtake for platinum. Holdings of the UK platinum ETF reached 338,689 oz by 11th June, up 49,661 oz on the end of May. On Nymex the noncommercial net long position was 630,550 oz by the week ending 9th June, up 88,150 oz on the week and the highest since January 2008, when the South
African power crisis first broke.
The sense of optimism might be because Chinese platinum jewellery demand is very strong, the latest forecast being 1.5 million oz in 2009, which even if it is a gross rather than net (of recycling) figure is impressive. Turnover on the Shanghai Gold Exchange (SGE) on a rolling 12m basis is the highest it has been, at just under 900,00 oz.
Platinum Outlook
The current platinum price is very strong when viewed historically, despite a sluggish economic backdrop. Chinese jewellery demand clearly is a factor, and relatively strong European car sales, propped up by government incentives have been. Maybe organic demand for new cars will have picked up by the time this somewhat artificial stimulus; if not, industrial demand will be hit. Short-term LME fix: $1,200/oz-$1,275/oz.
