[miningmx.com] — JOHNSON Matthey (JM) has predicted that flat conditions for the platinum market will continue into 2012 with a surplus of 195,000oz of the metal predicted for 2011.
The metals trading and refining firm has predicted – in its Platinum 2011 Interim Review published on Tuesday – that platinum will trade in a price range of between $1,450/oz and $1,800/oz during the next six months and average $1,650/oz.
JM also expects the platinum surplus to continue in 2012 and these predicted surpluses are despite only “modest” growth in production from South Africa.
The country’s platinum mines dominate the business accounting for 77% of world supply in 2010 and an estimated 75% in 2011 according to the JM statistics.
Platinum production from the South African mines during 2011 was hit by poor productivity in the first half of the year resulting mainly from safety stoppages and illegal strikes.
JM said shipments of platinum were maintained by sales from refined stocks and “pipeline releases” – a reference to the inventory of metal caught up in the lengthy refining and processing pipeline.
Instead, the bulk of the growth in supply to 6.4m oz in 2011 from 6.1m oz in 2010 has come from producers in North America and Zimbabwe.
According to the JM report the Zimbabwean platinum mining industry turned in an excellent performance in the first half of 2011.
Both the Zimplats and Mimosa operations ran steadily at full capacity while Anglo American Platinum’s (Amplats) new Unki mine ramped up production ahead of schedule.
JM said Unki shipped some 22,000oz of platinum in concentrate to Amplats refineries in South Africa and the mine should reach steady state production levels of around 60,000oz of platinum annually by end-2011.
Overall, Zimbabwe’s platinum production is expected to total 335,000oz this year, 20% up on 2010 levels.
Turning to general economic conditions JM said “the prognosis for the world economy in 2012 is looking increasingly gloomy” and warned of possible negative impacts on demand for platinum group metals (pgm).
“The trigger for this could be a failure of market confidence surrounding eurozone debt, perhaps as a result of disorderly debt restructuring in peripheral economies,” it said.
“Overall, the world looks set for a period of slower growth in 2012 with the risk of market pessimism turning into a genuine drop in physical demand.”
Regarding palladium, JM said it expected a surplus of 725,000oz for 2011 because of the impact of Russian state stock sales without which it noted “the palladium market would essentially be in balance”.
JM forecast the palladium price to range between $500/oz and $800/oz over the next six months and to average $650/oz.
The firm predicted the palladium market would “move into fundamental deficit” during 2012 mainly because of lower sales of Russian state stocks.
Predicting sales levels from Russian palladium stocks is an exercise fraught with hazard that many analysts have called wrong over the past 20 years because of the uncertainty over the actual level of the Russian palladium stockpile.
JM analyst Alison Cowley said the latest prediction was based on information provided by Russian authorities that there were only 9t (about 300,000oz) of palladium available for sale from stocks over the next two years.
“These numbers come from the Ministry of Finance which holds the palladium stock so they are more credible than previous estimates from other sources,” Cowley commented.
JM predicted world palladium supply at 7.42m oz in 2011 and total net demand at 6.7m oz.
Palladium supply is dominated by Russia which accounted for 50% of world output in 2010 and is estimated by JM to contribute 46% in 2011. South Africa produces palladium as a by-product of platinum mining and is the world’s second largest supplier of the metal.
