2012 PLATINUM MARKET OUTLOOK from Thomson Reuters GFMS
IMPORTANT NOTE: The following is for informational purposes only and was developed by Thomson Reuters GFMS. It does not take into account the investment objectives, financial situation or particular needs of any particular person. Information is from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Opinions and estimates are the judgment of Thomson Reuters GFMS and are subject to change without notice. Distribution of this information does not constitute agreement with, or an endorsement of, the views expressed. Obviously, future outcomes are impossible to predict with certainty. Investors should obtain advice based on their own individual circumstances and understand the risks before making any investment decisions.
Platinum Market Fabrication Demand Trends
Autocatalyst fabrication (42% of total in 2011) to see gentle rise, as European car output recovers
The comments about autocatalyst scrap in the preceding paragraph clearly apply also to the automotive sector when it comes to platinum demand. Although that sector increased its demand for platinum during 2011 it was not a smooth ride. The earthquake and tsunami in Japan affected market activity in the first quarter of 2011, but the Japanese industry’s efficiency and pragmatism in adversity, combined with the movement of some plant to offshore locations, meant at the bottleneck in supplies of parts in to North America was relatively short-lived and inventories were up towards normal levels by mid-year.
Diesel-powered vehicles comprise a much higher proportion of European light vehicle sales than elsewhere in the world, with an approximate 48% share and this has historically meant that Europe has commanded the lion’s share of platinum demand in the auto sector. This balance is shifting slightly, as palladium is continuing to make inroads into the diesel sector and now commands 20% of the total market through bi-metallic catalysts, although this rate of encroachment has been slowing.
Platinum demand in diesel applications is expected to increase again in 2012 as low sulphur diesel fuel becomes available in China (a development that has been long awaited but now looks to be on the horizon). Although North American, Japanese and Chinese industry executives are expecting a healthy outturn in their industries in 2012, the European industry, which accounts for 49% of platinum demand in the sector, is facing structural overcapacity and the mood is grim. We are expecting a reduction of up to 10% in platinum demand in the European auto sector this year and this leads to a flat profile for demand in the industry globally.
Jewelry demand is set to continue its recovery in 2012, after picking up in 2011
Demand for platinum jewelry is dominated by China, which experienced massive growth in the late 1990s and early 2000s, fell back and then staged resurgence towards the end of the decade. From 1999 to 2010 China accounted for 49% of platinum jewelry demand; it is estimated at 66% of total in 2011.
The market remains on a growth path, although it remains particularly price-sensitive, especially as jewelers’ margins remain tight. In the first eight months of 2011 the sector was broadly flat, while non-bridal jewelry faced increasing competition from twenty-four carat gold. The heavy price falls in September, and especially with platinum moving to a discount to gold saw resurgence in the industry, although much of the rebound is driven by retailers’ stock replenishment. In contrast, actual demand from final consumers did not pick up dramatically, as shops were loath to change their retail prices. Trading patterns over recent months suggest that, insofar as trigger points can be identified, the $1,400 level is seen as an attractive entry point (especially if gold is trading above that level), while $1,700 offers resistance. The restocking that clearly took place in the final four Nymex: Platinum Net Position months of 2011 will undermine the rate of growth in demand during 2012, although we expect the rate of change to increase thereafter.
Platinum jewelry demand elsewhere is steady, although there was rejuvenation in demand in Japan in September as the price dropped. This was, however, concentrated in ‘kihei’, a high purity chain which is sold as a quasi-investment product and favors only a small portion of the overall market.
Industrial demand to see mixed developments in 2012
Industrial demand slipped very slightly in 2011, largely as a result of weakness in the petroleum sector and slippage in the electronics sector. Demand in the chemical sector was flat, although glass demand remand resilient. New plant construction is expected to boost demand in the petroleum sector this year, as are fresh catalyst change-outs, some of which have been postponed from 2011. There should also be a small recovery in the electronics sector, while demand in the other sectors is likely to be flat. This leads to an overall increase of between 2% and 3% this year.
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