South Africa hits platinum jackpot

17 May 2006

Global platinum demand is set to soar to new record highs for the eighth year in a row in 2006, as vehicle manufacturers install more pollution-control devices, according to Johnson Matthey, the world’s largest distributor of platinum group metals.

South Africa is by far the world’s largest platinum producer, with an output of 77% of global supply in 2005. Local company Anglo Platinum alone produces 40% of the world’s platinum.

The country is also the second-largest producer of palladium, another platinum group metal, with 31% of global supply.

London-based Johnson Matthey has been a major platinum distributor for over 150 years, and is the world’s leading authority on the production, supply and use of platinum group metals which, with platinum and palladium, include rhodium, ruthenium and iridium.

Source: Johnson Mathey

Vehicles fuel demand
In its annual review of the platinum market, released on Monday, the group said the use of platinum in car catalysts is set to exceed 4-million ounces in 2006, “quite possibly by a significant margin”, compared with 3.8-million last year.

The new demand is buoyed by new US regulations requiring the fitment of emissions-reducing autocatalysts as standard equipment on most new heavy duty truck models, as well as by new European Union Euro IV emissions limits.

Platinum is needed for diesel catalysts, unlike those of petrol cars, which can use palladium. The introduction of low-sulphur diesel fuel in the US in September 2005, as well as the launch of new turbocharged diesel cars, may radically increase the market for diesel vehicles and, with it, demand for platinum.

According to Johnson Matthey, vehicle manufacturers’ purchase of platinum rose 9.5% in 2005. Global demand for the metal outstripped supply by 7 000 ounces. This year, the price of platinum has risen 32%, reaching a record US$1 340 (R8 51) per ounce on Friday.

Source: Johnson Mathey

Palladium on a high
Palladium, also used in catalysts and in jewellery, rose to a four-year high of $406.50 (R2 580) per ounce on Friday, and is likely to trade at $260 to $420 in the next six months, according to Johnson Matthey.

The company said that while production of the metal is set to exceed demand in 2006 for a sixth year in a row because of expanding output from South Africa, the high prices are likely to be sustained by speculative buying from hedge funds, which hold several million ounces.

Russia is the world’s largest palladium producer, with 55% of total supply last year. South Africa is in second place, with 31% of supply.

But SA has gradually gained market share for the metal over the past 10 years, with production rising from 1.7-million ounces in 1996 to 2.6-million in 2005. Russian production of palladium fell from 5.6-million to 4.6-million over the same period.

Source: Johnson Mathey

New mines increase production
The production of platinum group metals in South Africa rose 3.9% in the first quarter of 2006, increasing the country’s mining output by 1.1%. SA’s platinum output is expected to rise 8% for the year as a whole, as new mines launch production.

Anglo Platinum, majority owned by Anglo American, plans to expand output at a compound average rate of about 5% a year. The company is awaiting final board approval for a major expansion at Potgietersrus, which will more than double its platinum production.

“We continue to increase our production capacity to meet global demand,” Anglo Platinum chief executive Ralph Havenstein told Business Day. “We’re encouraged by strong physical demand.” reporter

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