Platinum and Palladium markets...

Platinum Market Moving Towards
Surplus, Price Expected To Soften

       Platinum demand will grow by less than 1% and the platinum market will be very close to balance in 2004,according to Johnson Matthey in its latest survey, Platinum 2004 Interim Review.
       Increased demand for platinum from the automobile and glass industries will be largely offset by weaker purchases of platinum by jewelry manufacturers to bring total demand in 2004 to 6.47 million oz, a rise of just 50,000 oz on 2003.

       Auto demand is up because of the strong European market for diesel engine cars, which use platinum autocatalysts, and because of tighter emissions regulations being introduced in Europe and Japan. The expansion of liquid crystal display (LCD) glass manufacturing in Asia has boosted demand for platinum in the industrial sector, but the high price of platinum has affected Chinese jewelry demand for the second year running, with manufacturers reducing stocks and diverting production into other white metals.
       Although lower Russian sales of platinum are expected in 2004, higher output from Canada and South Africa will more than compensate and total supply is forecast at 6.43 million oz. Up 230,000 oz on 2003. This will significantly narrow the gap between supply and demand, leaving a market deficit of just 40,000 oz.
       The platinum price averaged $845 per oz in the first ten months of 2004 (up 25% year on year), supported by hedge fund and other investor buying and by the firmness of overall demand, In 2005, Johnson Matthey predicts that supplies of platinum will expand faster than demand, so that the market will move into surplus for the first time in six years. This will lead to a slightly softer platinum price, in the range $760 to $880 per oz for the next six months.

Palladium Demand Recovering
Price Pegged By Oversupply

       The palladium market is set for another 1 million oz surplus in 2004 which has put a cap on the price despite a recovery in demand and strong speculative buying. Demand for palladium is forecast to rise by 730,000 oz to 6.14 million oz. Purchases by the auto industry are projected to grow in 2004 as US auto companies use less metal from inventory and as global light vehicle production rises. However, the largest factor in the increase will be the introduction of palladium jewelry in China - purchases of palladium in the first quarter of 2004 climbed as jewelry wholesalers and retailers established stocks.

       Supplies of palladium in 2004 are projected to rise by 700,000 oz to 7.16 million oz, with a large increase in Russian metal coming onto the market as Stillwater has begun to sell the stock of palladium it acquired from Norilsk Nickel in 2003. The market surplus, which is forecast to reach 1.02 million oz this year, has weighed on the price of palladium. Apart from a short lived and fund driven rally to $333 per oz in April, it has been largely confined below $240 per oz.
       As supplies of palladium are projected to grow solidly in 2005, the palladium market is likely to again be in surplus and, unless there is further investor buying, downward pressure on the price will increase. On balance Johnson Matthey expects palladium to trade between $160 and $250 for the next six months.