All three of the major platinum group metals markets underwent important and significant changes in 2005, setting the stage for even more changes in 2006, according to an annual report.
Investors took an increasingly greater role in the PGM market. South Africa continued to provide the bulk of platinum and rhodium supplies. Russian exports of palladium contributed the major share of supplies in 2005 and should do so this year. Automotive demand for PGMs remains strong. Chinese demand for platinum and palladium meanwhile remains mixed. Platinum prices rose to historical levels earlier this year, palladium prices have risen to levels not experienced since 2002, while rhodium prices tested highs not seen since early 1991. All of this was laid out in the “Platinum Yearbook 2006,” published by CPM Group.
Platinum prices averaged $899.96 in 2005, up 6.4 percent from the previous year. In the first five months of 2006, prices averaged $1,102.57, 27.3 percent higher than the similar period last year.
Total platinum supply rose an estimated 1.4 percent to total 7,213,000 ounces in 2005, according to the report. This year, supplies are projected to amount to 7,764,000 ounces, up 7.6 percent. Mine production did not increase as much as it was anticipated to last year. Supplies from mine production totaled 5,633,000 ounces in 2005, up 1.4 percent from the previous year. Mine production could amount to 6,199,000 ounces this year, up 10 percent, with mine expansion programs materializing and adding new supplies. Secondary supply could experience a moderate increase of 4.5 percent to 815,000 ounces this year. Russian exports may offset this increase, with supplies from this source down 6.3 percent to 750,000 ounces projected for this year.
Fabrication demand for platinum is forecast to accelerate 5 percent to 7,351,000 ounces this year. This is lower than the 6.3 percent rise in 2005, when demand totaled 7,003,000 ounces. Auto use continues to experience healthy growth rates, with 3,932,000 ounces expected to be used this year, up 9.6 percent from the 3,586,000 ounces used in 2005. Jewelry and Chinese demand may decline this year but both could be offset by an increase in demand for other uses.
The surplus in the platinum market is projected to increase this year to 413,000 ounces. This is up from the surplus of 210,000 ounces calculated last year. Surpluses are measured as total new supply less fabrication demand, without counting investment demand for physical platinum as part of fabrication demand.
Palladium prices averaged $204.08 last year, down 12.5 percent from 2004. Through May 2006, prices averaged $323.92, up 67.8 percent from the similar 2005 period.
Total palladium supply rose 15.9 percent to 8,169,000 ounces in 2005. This year total supplies may expand 3.6 percent to 8,465,000 ounces. In 2005, mine production fell a slight 0.8 percent to 3,709,000 ounces, but this year could rise 10.7 percent to 4,108,000 ounces. Russian exports provided the bulk of the supply increase in 2005 with 3,100,000 ounces coming from this source, up 55 percent from the previous year. Russian exports may total 2,950,000 ounces this year. Secondary supply may rise to 1,407,000 ounces this year, up 3.5 percent from 1,359,000 ounces in 2005.
Industrial palladium demand is projected to rise 5.1 percent this year to 7,140,000 ounces. This is down from double-digit growth posted in 2004 and in 2005 when demand increased 21.6 percent to 5,888,000 ounces and 15.4 percent to 6,794,000 ounces, respectively. Automotive demand is expected to post the largest increase this year, perhaps totaling 3,750,000 ounces, up 7.4 percent or 259,000 ounces from last year. Demand for use in electronics, dental, and other applications also are expected to increase this year. Chinese demand could decline in 2006, however.
The net surplus in the palladium market is forecast to decline this year to 1,325,000 ounces, down from 1,375,000 ounces in 2005.
Rhodium prices averaged $1,967 in 2005, up 117.9 percent from 2004’s average of $903. Prices have approached the historical record of $7,000 per ounce, set in 1991, this year. Johnson Matthey’s dealer price peaked at $6,275 in May 2006. The Platinum Yearbook uses Metals Week New York Dealer prices, which reached $5,900 in May 2006. In the first five months of 2006, rhodium prices averaged $3,898, up 166.2 percent from the similar period last year.
Total rhodium supply is projected to rise 6.8 percent to 1,009,688 ounces in 2006. Mine production will contribute the bulk of supply, with 773,188 ounces projected to be refined from mine output in 2006.
Fabrication demand could absorb 942,650 ounces this year, down 4.3 percent from last year. Automotive demand could use up to 773,000 ounces in 2006, down 5.6 percent from the 819,000 ounces used last year.
The rhodium market is expected to move into a surplus this year of 67,038 ounces, compared to last year’s deficit of 38,968 ounces.
CPM Group’s Platinum Yearbook 2006 is available in printed and/or PDF format at a cost of $150. Contact CPM Group at 30 Broad St., 37th Floor. New York, NY 10004; 212-785-8320. Fax: 212-785-8325; email: email@example.com. The report may be ordered and downloaded online at www.cpmgroup.com.