Johnson Matthey: Platinum 2012 Interim Review

  Johnson Matthey: Platinum 2012 Interim Review



Business Wire

LONDON -- November 13, 2012

A substantial reduction in supplies, as well as lower volumes of autocatalyst
recycling, will move the platinum market from surplus to deficit in 2012,
according to Johnson Matthey in “Platinum 2012 Interim Review”, released
today. Severe disruption to pgm mining is expected to reduce sales from South
Africa and result in a 10% drop in worldwide platinum supplies to 5.84 million
ounces. Gross demand is predicted to remain firm, at 8.07 million ounces,
while a decline in recycling will help decidedly shift the market into a
deficit of 400,000 oz.

Platinum supplies from South Africa are forecast to fall by 12% year-on-year
to 4.25 million ounces, an eleven-year low. South African platinum production
losses due to strikes and safety stoppages in the first three quarters of 2012
are estimated to be at least 300,000 oz. The closure of marginal operations by
some junior producers and below-plan performance at other mines will also
account for some reduction in supply this year. Output and sales of platinum
from other producing regions will remain broadly flat.

Gross platinum demand in autocatalysts is predicted to soften by 1% to 3.07
million ounces. Falling vehicle production in Europe, together with a slight
decline in the market share of diesel cars in the region, will be largely
offset by higher purchasing of platinum by Japanese manufacturers as output
improves following last year’s natural disasters. Greater demand is also
expected from the light duty diesel sector in India, where sales have grown
strongly in 2012, as well as more platinum used in heavy duty diesel emissions
aftertreatment worldwide.

Demand for platinum in the jewellery sector is expected to reach a three-year
high of 2.73 million ounces. Gross demand from the trade in China is forecast
to reach 1.92 million ounces driven by lower average platinum prices and an
increase in the manufacturing of platinum jewellery to stock new retail stores
being opened by Hong Kong brands in mainland China. Consumer demand for
platinum jewellery in India has continued to grow, prompting an expansion of
platinum jewellery manufacturing and retailing.

Industrial demand for platinum is forecast to subside by 13% to 1.79 million
ounces in 2012. In the glass manufacturing sector, new purchasing will be
offset by the use of platinum scrapped from old facilities and the drawing
down of inventory bought last year. Electrical demand is also expected to
soften but purchasing of platinum for non-road emissions control applications
will rise.

Physical investment demand for platinum is expected to remain positive, at
490,000 oz. Investment in physically-backed exchange traded funds (ETFs) has
largely followed the price during 2012, with net investment generally during
periods of rising price. Net acquisitions by investors in the Japanese large
bar market and in the coin sector will also supplement demand.

Platinum recycling is forecast to fall by 11% to 1.83 million ounces in 2012.
Platinum recovery from spent end-of-life vehicle catalysts is expected to
soften as collectors have been holding on to spent converters in anticipation
of improved prices. Platinum jewellery recycling will also weaken due to lower
returns of old consumer pieces in Japan.

In 2013, gross platinum demand is expected to see modest growth, with steady
autocatalyst demand and a recovery in industrial purchasing. However, as a
result of ongoing disruption and possible restructuring of the industry, it is
difficult to expect an increase in supplies from South Africa of any great
magnitude from the 4.25 million ounces forecast this year. Recycling could be
a key factor in the platinum market balance in 2013, especially if prices see
a material and sustained improvement, driving higher throughput of catalyst
substrates to refineries.



The balance of the palladium market is forecast to swing by over 2 million
ounces this year from surplus to deficit, due to lower supplies, higher gross
demand and less recycling. Supplies will contract mainly because of lower
sales of Russian state stocks, while recycling will be constrained by subdued
pgm prices. Gross palladium demand is predicted to rise to 9.73 million
ounces, driven by a return to positive net physical investment and higher
autocatalyst purchasing, moving the palladium market into a deficit of 915,000

Supplies of palladium are predicted to decline to a nine-year low of 6.57
million ounces. Palladium supplies from South Africa are forecast to fall by
6% this year, to 2.40 million ounces, in line with lower underlying platinum
output. Newly refined palladium supplies from Russia are expected to decrease
due to a change in the ore mix and falling average grades. Sales of Russian
state stocks are forecast to drop by over half a million ounces compared with
last year, to 250,000 oz.

Purchasing of palladium by the autocatalyst sector is expected to rise by 7%
to a new high of 6.48 million ounces. Demand for palladium is forecast to
benefit from growth in global vehicle production, with the strongest
performance in the principally gasoline markets of Japan and the USA, as well
as continuing substitution of platinum in both light and heavy duty diesel
aftertreatment formulations.

Industrial demand for palladium is forecast to soften by 3% to 2.41 million
ounces. In electrical applications, a long-term trend towards using cheaper
base metal alternatives to palladium in all but niche and high-end
applications continues to drive demand lower. However, a wave of chemical
plant construction in China will stimulate purchasing of palladium for new
catalyst charges.

This year is set to mark the return to positive physical palladium investment
demand, in contrast with the net liquidation seen in 2011. For the year as a
whole, a change in investor sentiment towards palladium ETFs is expected to
result in 385,000 oz of net new physical investment demand, a swing of 950,000
oz compared with last year.

Gross demand for palladium in jewellery is predicted to dampen by 11% to
450,000 oz. Purchasing of palladium by the Chinese jewellery sector is
expected to decline once again as the metal continues to suffer from a lack of
positioning and effective marketing, as well as competition from low-fineness
gold alloys.

Supplies of palladium are expected to fall in 2013 as a result of lower output
from Russia and the diminishing likelihood of a significant increase in output
from South Africa. Another year of solid autocatalyst and industrial demand is
forecast, together with higher returns of palladium from end-of-life vehicle

  Johnson Matthey’s six-month platinum and palladium price forecasts will be
  given at the Platinum 2012 Interim Review launch presentations on Tuesday
                             13^th November 2012.

 Platinum 2012 Interim Review is Johnson Matthey’s latest free survey of the
platinum group metals market. Johnson Matthey is the world’s leading authority
         on production, supply and use of the platinum group metals.

               Please use our Twitter hashtag: #PlatinumInt2012


Jonathan Butler
+44 (0)7967 278024
Jeremy Coombes
+44 (0)7967 278012
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