By Daniela Cambone
(Kitco News) - Reports that Corning Inc. stockpiled $2 billion of metal, mostly platinum and rhodium, for “certainty of the price,” will not likely have a big impact on the price of the metals, said CPM Group, the commodities market research firm.

Jeffrey Christian, Managing Director for CPM Group, said that the fact that they have these inventories does not have an immediate or large impact on rhodium prices, as evidenced by the fact that rhodium prices spiked to $10,000 in early 2008 when South African producers had to declare force majeure on shipments due to electricity shortages.

Corning makes thousands of products but derives nearly all of its profit from its LCD business, where it is the world's largest supplier. Corning Inc. uses platinum and rhodium to line the melting tanks in which it makes glass for television sets and other consumer electronics.

A Wall Street Journal report cited Corning’s company Treasurer Mark Rogus gave the news of the stock pilings. The WSJ report said that to reduce the risk of higher prices, Corning has entered contracts that pay around $2,300 an ounce for rhodium and between $1,400 and $1,600 an ounce for platinum.

“While some fabricators will lease some of their inventories to the market, when supply problems occur and prices spike higher most holders of inventories become even more cautious than usual about allowing some of their metal to be leased out,” Christian said.

Christian stressed that although CPM Group does not speak about individual companies’ positions in the metals market; he noted that several companies, including glass manufacturers, have relatively large inventories of rhodium that they purchased in the past, in some cases in the 1980s, against later potential supply disruptions.

Historically, rhodium has been quite volatile. A lack of supply led to it peaking at $10,000/oz in 2008 but with the car industry plummeting in the third quarter of 2008, rhodium’s price fell by more than 90%.

Rather, at $1,828 a troy ounce, platinum is up more than 20% from a year ago. Many consumer products—including cars, electronics and pharmaceuticals—either contain platinum or require it for processing, Jon Nadler, Senior Analyst of Kitco Metals says.

"The situation we see developing here is, in effect, an off-exchange warehouse hoarding of certain metals by funds (via ETFs),” says Nadler.

Because noble metals prices are being pushed to such high levels, it should come as no surprise that the primary users of the same metals are now beginning to "compete" with the investment fund world, he says. The primary users are trying to, “hoard their own essential supplies of such metals.”

At some point, something has to give, says Nadler. “Either funds will take profits or the various manufacturing niches will ramp up their ‘price-protection’ campaigns in various ways."

By Daniela Cambone of Kitco News dcambone@kitco.com
Courtesy: www.kitco.com

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