Platinum Expert Sees Global Shortage in 2005

The price of platinum jewelry is likely to rise in 2005 as strong demand for the precious metal from the auto industry outstrips global supply, industry insiders said.

The market will probably slip back into deficit next year following the trend of the past few years after a balance or slight surplus this year, according to the head of the world's second biggest platinum producer, Implats.

“I don't think it will be a significant surplus if anything [in 2004], but thereafter we anticipate deficits recurring again,” Implats’ Chief Executive Keith Rumble told Reuters.

A growing demand for platinum by carmakers that use the metal in devices to clean exhaust fumes on diesel vehicles would be the main factor causing a likely deficit, he said.

Rumble said Implats was pleased that spot platinum prices have fallen from a 24-year record price of $942 per ounce in April, due to shortages and speculative buying, to current levels around $800.

“It's really in no one's interest to have prices of over $800 for the metal because that's going to force substitution,” he said.

Chinese jewelry demand, another key driver of the platinum market, decreased sharply when prices were around the $900 mark, but were now back at normal levels, Rumble said.

"Where there was certainly a move away from the metal at $900, we've seen quite a lot of buying taking place at the current levels around $800. There seems to be an acceptance that that's a reasonable price level and that manufacturers can make a decent margin at those levels," he said.

China’s annual demand for platinum has increased to around one million ounces of platinum, around 15 percent of the global total, but Implats forecasts that the figure will be down by around 300,000 ounces this year, Rumble said.